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Item 8. Financial Statements and Supplementary Data

2020-10-19 compared with 2019-10-17 · 626 added, 604 removed, 592 unchanged (68% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Consolidated Financial Statements as of August 29, 2019 and August 30, 2018 and for the fiscal years ended

August 29, 2019, August 30, 2018, and August 31, 2017

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Micron Technology, Inc.

1 unchanged sentence

(in millions, except per share amounts)

For the year ended

For the year ended September 3,

2020 August 29,

2019 August 30,

Revenue $ 21,435 $ 23,406 $ 30,391

Cost of goods sold 14,883 12,704 12,500

Selling, general, and administrative

Gross margin 6,552 10,702 17,891

Research and development 2,600 2,441 2,141

Selling, general, and administrative 881 836 813

Other operating (income) expense, net 68 49 ( 57 )

3 unchanged sentences

Other non-operating income (expense), net 60 ( 405 ) ( 465 )

2,983 7,048 14,307

Income tax (provision) benefit ( 280 ) ( 693 ) ( 168 )

Equity in net income (loss) of equity method investees

Net income 2,710 6,358 14,138

Net income attributable to noncontrolling interests ( 23 ) ( 45 ) ( 3 )

1 unchanged sentence

Earnings per share

Basic $ 2.42 $ 5.67 $ 12.27

Diluted 2.37 5.51 11.51

Number of shares used in per share calculations

Basic 1,110 1,114 1,152

Diluted 1,131 1,143 1,229

See accompanying notes to consolidated financial statements.

47 | 2020 10-K

Micron Technology, Inc.

1 unchanged sentence

(in millions)

For the year ended

For the year ended September 3,

2020 August 29,

2019 August 30,

Net income $ 2,710 $ 6,358 $ 14,138

Other comprehensive income (loss), net of tax

Pension liability adjustments

Gains (losses) on derivative instruments 46 ( 3 ) ( 15 )

Foreign currency translation adjustments

Pension liability adjustments 15 ( 6 ) ( 3 )

Gains (losses) on investments 1 9 ( 2 )

Foreign currency translation adjustments — ( 1 ) 1

Other comprehensive income (loss) 62 ( 1 ) ( 19 )

1 unchanged sentence

Comprehensive income attributable to noncontrolling interests

( 23 ) ( 45 ) ( 3 )

Comprehensive income attributable to Micron $ 2,749 $ 6,312 $ 14,116

3 unchanged sentences

(in millions, except par value amounts)

As of September 3,

2020 August 29,

Cash and equivalents $ 7,624 $ 7,152

Short-term investments 518 803

Receivables 3,912 3,195

Inventories 5,607 5,118

Other current assets 304 235

2 unchanged sentences

Property, plant, and equipment 31,031 28,240

Operating lease right-of-use assets 584 —

Intangible assets 334 340

Deferred tax assets 707 837

Goodwill 1,228 1,228

Other noncurrent assets 781 575

Total assets $ 53,678 $ 48,887

Liabilities and equity

Accounts payable and accrued expenses $ 5,817 $ 4,626

Current debt 270 1,310

Other current liabilities 548 454

1 unchanged sentence

Long-term debt 6,373 4,541

Noncurrent operating lease liabilities 533 —

Noncurrent unearned government incentives 643 636

2 unchanged sentences

Commitments and contingencies

Redeemable convertible notes

Redeemable noncontrolling interest — 98

4 unchanged sentences

Treasury stock, 81 shares held ( 76 shares as of August 29, 2019)

Accumulated other comprehensive income

( 3,495 ) ( 3,221 )

Accumulated other comprehensive income (loss) 71 9

Total Micron shareholders’ equity 38,996 35,881

Noncontrolling interests in subsidiaries

Noncontrolling interest in subsidiary — 889

Total equity 38,996 36,770

Total liabilities and equity $ 53,678 $ 48,887

See accompanying notes to consolidated financial statements.

49 | 2020 10-K

Micron Technology, Inc.

2 unchanged sentences

Micron Shareholders

Additional Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive

Income (Loss)

Total Micron Shareholders' Equity

Noncontrolling Interests in Subsidiaries

Balance at September 1, 2016

Common Stock Additional Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive

Income (Loss) Total Micron Shareholders’ Equity Noncontrolling Interests in Subsidiaries Total Equity

of Shares Amount

Balance at August 31, 2017 1,116 $ 112 $ 8,287 $ 10,260 $ ( 67 ) $ 29 $ 18,621 $ 849 $ 19,470

— — — 14,135 — — 14,135 3 14,138

Other comprehensive income (loss), net

— — — — — ( 19 ) ( 19 ) — ( 19 )

Stock issued in public offering

34 3 1,363 — — — 1,366 — 1,366

Stock issued under stock plans

22 2 287 — — — 289 — 289

Stock-based compensation expense

Repurchase and retirement of stock

Stock issued to Nanya for Inotera Acquisition

— — 198 — — — 198 — 198

Contributions from noncontrolling interest

— — — — — — — 18 18

Repurchase of stock ( 2 ) — ( 71 ) — — — ( 71 ) — ( 71 )

Settlement of capped calls

— — 429 — ( 429 ) — — — —

Reclassification of redeemable convertible notes, net — — 18 — — — 18 — 18

Conversion of convertible notes

Cash settlement and repurchase of convertible notes

— — ( 2,310 ) — 67 — ( 2,243 ) — ( 2,243 )

Balance at August 30, 2018 1,170 $ 117 $ 8,201 $ 24,395 $ ( 429 ) $ 10 $ 32,294 $ 870 $ 33,164

Cumulative effect from adoption of new accounting standards — — — 92 — — 92 — 92

Net income — — — 6,313 — — 6,313 36 6,349

Other comprehensive income (loss), net — — — — — ( 1 ) ( 1 ) — ( 1 )

Stock issued in public offering

Stock issued under stock plans 14 1 178 — — — 179 — 179

Stock-based compensation expense — — 243 — — — 243 — 243

Contributions from noncontrolling interest

Repurchase and retirement of stock

Settlement of capped calls

Repurchase of stock ( 2 ) — 103 ( 39 ) ( 2,792 ) — ( 2,728 ) — ( 2,728 )

Acquisitions of noncontrolling interest

— — 1 — — — 1 ( 17 ) ( 16 )

Reclassification of redeemable convertible notes, net — — 3 — — — 3 — 3

Conversion and repurchase of convertible notes

Cash settlement of convertible notes — — ( 515 ) — — — ( 515 ) — ( 515 )

Balance at August 29, 2019 1,182 $ 118 $ 8,214 $ 30,761 $ ( 3,221 ) $ 9 $ 35,881 $ 889 $ 36,770

Cumulative effect of adopting new

accounting standards

Net income — — — 2,687 — — 2,687 15 2,702

Other comprehensive income (loss), net — — — — — 62 62 — 62

2 unchanged sentences

Repurchase of stock ( 2 ) — ( 11 ) ( 64 ) ( 176 ) — ( 251 ) — ( 251 )

Settlement of capped calls — — 98 — ( 98 ) — — — —

Acquisitions of noncontrolling interests — — 120 — — — 120 ( 904 ) ( 784 )

Reclassification of redeemable convertible notes, net

Conversion of convertible notes

Balance at August 29, 2019

Cash settlement of convertible notes — — ( 56 ) — — — ( 56 ) — ( 56 )

Balance at September 3, 2020 1,194 $ 119 $ 8,917 $ 33,384 $ ( 3,495 ) $ 71 $ 38,996 $ — $ 38,996

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in millions)

For the year ended

For the year ended September 3,

2020 August 29,

2019 August 30,

Cash flows from operating activities

Net income $ 2,710 $ 6,358 $ 14,138

Adjustments to reconcile net income to net cash provided by operating activities

1 unchanged sentence

Amortization of debt discount and other costs 26 49 101

Loss on debt prepayments, repurchases, and conversions

Stock-based compensation 328 243 198

Gain on remeasurement of previously-held equity interest in Inotera

(Gains) losses on debt prepayments, repurchases, and conversions ( 40 ) 396 385

Change in operating assets and liabilities

Receivables ( 723 ) 2,431 ( 1,734 )

Inventories ( 489 ) ( 1,528 ) ( 472 )

Accounts payable and accrued expenses 725 ( 174 ) 668

Payments attributed to intercompany balances with Inotera

Deferred income taxes, net 79 150 ( 265 )

Other 40 ( 160 ) ( 378 )

Net cash provided by operating activities 8,306 13,189 17,400

2 unchanged sentences

Purchases of available-for-sale securities ( 1,857 ) ( 4,218 ) ( 760 )

Acquisition of Inotera

Proceeds from maturities of available-for-sale securities

Proceeds from sales of available-for-sale securities 1,458 1,504 604

Proceeds from maturities of available-for-sale securities 814 1,541 320

Proceeds from government incentives 262 748 355

Other ( 43 ) 120 144

Net cash provided by (used for) investing activities ( 7,589 ) ( 10,085 ) ( 8,216 )

1 unchanged sentence

Repayments of debt ( 4,366 ) ( 3,340 ) ( 10,194 )

Acquisition of noncontrolling interest in IMFT ( 744 ) — —

Payments to acquire treasury stock ( 251 ) ( 2,729 ) ( 71 )

2 unchanged sentences

Proceeds from issuance of stock 225 179 1,655

Other ( 118 ) ( 23 ) 31

Net cash provided by (used for) financing activities ( 317 ) ( 2,438 ) ( 7,776 )

Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash 411 692 1,371

Cash, cash equivalents, and restricted cash at beginning of period 7,279 6,587 5,216

3 unchanged sentences

Interest paid, net of amounts capitalized ( 165 ) ( 53 ) ( 312 )

Noncash investing and financing activity

Equipment acquisitions on contracts payable and capital leases

Noncash equipment acquisitions on contracts payable 278 119 84

See accompanying notes to consolidated financial statements.

51 | 2020 10-K

Micron Technology, Inc.

4 unchanged sentences

Micron Technology, Inc., including its consolidated subsidiaries, is an industry leader in innovative memory and storage solutions.

Through our global brands – Micron, Crucial, and Ballistix – our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, 3D XPoint memory, and NOR, is transforming how the world uses information to enrich life.

Backed by 40 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, 5G, machine learning, and autonomous vehicles, in key market segments like mobile, data center, client, consumer, industrial, graphics, automotive, and networking.

Through our global brands — Micron ® and Crucial ® — our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, 3D XPoint memory, and NOR, is transforming how the world uses information to enrich life for all .

Backed by more than 40 years of technology leadership, our memory and storage solutions enable disruptive trends, including artificial intelligence, 5G, machine learning, and autonomous vehicles, in key market segments like mobile, data center, client, consumer, industrial, graphics, automotive, and networking.

The accompanying consolidated financial statements include the accounts of Micron and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America.

1 unchanged sentence

Certain reclassifications have been made to prior period amounts to conform to current period presentation .

Information prior to 2019 is presented in accordance with the accounting guidance in effect during that period and has not been recast for recently adopted accounting standards.

See "Recently Adopted Accounting Standards" note.

See “Recently Adopted Accounting Standards.”

Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31.

Fiscal years 2019, 2018, and 2017 each contained 52 weeks.

Fiscal 2020 contained 53 weeks and fiscal 2019 and 2018 each contained 52 weeks.

Our fourth quarter of fiscal 2020 contained 14 weeks.

All period references are to our fiscal periods unless otherwise indicated.

1 unchanged sentence

We use derivative instruments to manage our exposure to changes in currency exchange rates from (1) our monetary assets and liabilities denominated in currencies other than the U.S.

dollar and (2) forecasted cash flows for certain capital expenditures.

dollar and (2) forecasted cash flows for certain capital expenditures and manufacturing costs.

Derivative instruments are measured at their fair values and recognized as either assets or liabilities.

1 unchanged sentence

For derivative instruments that are not designated for hedge accounting, gains or losses from changes in fair values are recognized in other non-operating income (expense).

For derivative instruments designated as cash flow hedges, the effective portion of the realized and unrealized gains or losses on derivatives is included as a component of accumulated other comprehensive income.

Amounts in accumulated other comprehensive income are reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings.

For the periods presented prior to the second quarter of 2018, the ineffective and excluded portion of the realized and unrealized gain or loss was included in other non-operating income (expense).

As a result of adopting Accounting Standards Update ("ASU") 2017-12, beginning in the second quarter of 2018, such amounts are included in the same line item in which the underlying transactions affect earnings.

For derivative forward contracts designated as fair value hedges, hedge effectiveness is determined by the change in the fair value of the undiscounted spot rate of the forward contract.

The changes in fair values of hedge instruments attributed to changes in undiscounted spot rates are recognized in other non-operating income (expense).

The time value associated with hedge instruments is excluded from the assessment of the effectiveness of hedges and is recognized on a straight-line basis over the life of hedges to other non-operating income (expense).

For derivative instruments designated as cash flow hedges, gains or losses are included as a component of accumulated other comprehensive income and reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings.

We enter into master netting arrangements with our counterparties to mitigate credit risk in derivative hedge transactions.

9 unchanged sentences

Goodwill and Non-Amortizing Intangible Assets

We perform an annual impairment assessment for goodwill and non-amortizing intangible assets in the fourth quarter of our fiscal year.

We perform an annual impairment assessment for goodwill and non-amortizing intangible assets in our fourth quarter each year.

Government Incentives

11 unchanged sentences

When net realizable value (which requires projecting future average selling prices, sales volumes, and costs to complete products in work in process inventories) is below cost, we record a charge to cost of goods sold to write down inventories to their estimated net realizable value in advance of when inventories are actually sold.

We review the major characteristics of product type and markets in determining the unit of account for which we perform the lower of average cost or net realizable value analysis and categorize inventories primarily as memory (including DRAM, NAND, and other memory).

We review the major characteristics of product type and markets in determining the unit of account for which we perform the lower of average cost or net realizable value analysis and categorize all inventories (including DRAM, NAND, and other memory) as a single group.

We remove amounts from inventory and charge such amounts to cost of goods sold on an average cost basis.

In the first quarter of 2020, we elected new accounting policies in connection with the adoption of ASC 842 – Leases .

We do not recognize a right-of-use asset or a lease liability for leases with a term of 12 months or less.

For real estate and gas plant leases entered into after adoption, we do not separate lease and non-lease components.

Sublease income is presented within lease expense.

Product and Process Technology

Costs incurred to (1) acquire product and process technology, (2) patent technology, and (3) maintain patent technology, are capitalized and amortized on a straight-line basis over periods ranging up to 12.5 years.

We capitalize a portion of the costs incurred to patent technology based on historical data of patents issued as a percent of patents we file.

Capitalized product and process technology costs are amortized over the shorter of (1) the estimated useful life of the technology, (2) the patent term, or (3) the term of the technology agreement.

We capitalize a portion of costs incurred to patent technology based on historical data of patents issued as a percent of patents we file.

Product and process technology costs are amortized over the shorter of (1) the estimated useful life of the technology, (2) the patent term, or (3) the term of the technology agreement.

Fully-amortized assets are removed from product and process technology and accumulated amortization.

1 unchanged sentence

We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery.

Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of, or a credit with respect to, amounts paid for such items.

53 | 2020 10-K

respect to, amounts paid for such items.

Under certain circumstances, we provide more extensive limited warranty coverage than that provided under our standard terms and conditions.

10 unchanged sentences

Subsequent to product qualification, product costs are included in cost of goods sold.

Product design and other R&D costs for certain technologies may be shared with a development partner.

Amounts from cost-sharing arrangements are reflected as a reduction of R&D expense.

3 unchanged sentences

We estimate a liability for returns using the expected value method based on historical rates of return.

In addition, we generally offer price protection to our distributors, which is a form of variable consideration that decreases the transaction

In addition, we generally offer price protection to our distributors, which is a form of variable consideration that decreases the transaction price.

We use the expected value method, based on historical price adjustments and current pricing trends, to estimate the amount of revenue recognized from sales to distributors.

14 unchanged sentences

Variable Interest Entities

We have interests in entities that are VIEs.

We have interests in entities that are variable interest entities (“VIEs”).

If we are the primary beneficiary of a VIE, we are required to consolidate it.

10 unchanged sentences

Therefore, we do not consolidate PTI Xi’an.

In connection with our assembly services with PTI, as of August 29, 2019 and August 30, 2018 , we had net property, plant, and equipment of $50 million and $63 million , respectively, and capital lease obligations of $47 million and $63 million , respectively.

Our agreement for PTI to provide assembly services to us is deemed to contain an embedded lease for accounting purposes.

As a result, as of September 3, 2020 and August 29, 2019, the accompanying consolidated balance sheets included net property, plant, and equipment of $ 38 million and $ 50 million, respectively, and finance lease obligations of $ 35 million and $ 47 million, respectively, in connection with this agreement.

Consolidated VIE

IMFT is a VIE because all of its costs are passed to us and its other member, Intel, through product purchase agreements and because IMFT is dependent upon us or Intel for additional cash requirements.

The primary activities of IMFT are driven by the constant introduction of product and process technology.

Because we perform a significant majority of the technology development, we have the power to direct its key activities.

We consolidate IMFT because we have the power to direct the activities of IMFT that most significantly impact its economic performance and because we have the obligation to absorb losses and the right to receive benefits from IMFT that could potentially be significant to it.

In January 2019, we exercised our option to acquire Intel's interest in IMFT.

Subsequently, Intel set the closing date to occur on October 31, 2019, at which time IMFT will become a wholly-owned subsidiary.

(See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)

Through October 31, 2019, IMFT was a VIE because all of its costs were passed to us and its other member, Intel, through product purchase agreements and because IMFT was dependent upon us or Intel for additional cash requirements.

The primary activities of IMFT were driven by the constant introduction of product and process technology.

Because we performed a significant majority of the technology development, we had the power to direct its key activities.

We consolidated IMFT due to this power and our obligation to absorb losses and the right to receive benefits from IMFT that could have been potentially significant to it.

We acquired Intel’s interest in IMFT on October 31, 2019, at which time IMFT, now known as MTU, became a wholly-owned subsidiary.

(See “Equity – Noncontrolling Interest in Subsidiary.”)

Recently Adopted Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 – Intra-Entity Transfers Other Than Inventory ("ASU 2016-16"), which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.

We adopted this ASU in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments as noted in the table below.

In January 2016, the FASB issued ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities , which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities.

We adopted this ASU in the first quarter of 2019 under the modified retrospective method, with prospective adoption for amendments related to equity securities without readily determinable fair values.

The adoption of this ASU did not have a material impact on our financial statements.

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers (as amended, "ASC 606"), which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States.

The core principal of ASC 606 is that an entity should recognize revenue when it transfers control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

ASC 606 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract.

We adopted ASC 606 in the first quarter of 2019 under the modified retrospective method and, in connection therewith, made certain adjustments as noted in the table below.

We applied ASC 606 to contracts with customers that had not yet been completed as of the adoption date.

The following table summarizes the effects of adopting ASU 2016-16 and ASC 606:

Ending Balance

August 30, 2018

Opening Balance

August 31, 2018

Other current assets

Deferred tax assets

Other current liabilities

Other noncurrent liabilities

Retained earnings

As a result of the adoption of ASC 606, the opening balances as of August 31, 2018 for receivables, other current assets, and other current liabilities increased due to the reclassification of allowances for rebates, pricing adjustments, and returns to conform to the new presentation requirements.

In addition, the margin from previously deferred sales to distributors was reclassified from other current liabilities to retained earnings.

The tax effects of the adoption of ASC 606 were recorded primarily as a reduction of net deferred tax assets, substantially as a result of recognizing income for accounting purposes earlier under ASC 606 than for tax purposes in various jurisdictions.

The effects of ASC 606 to our consolidated statement of operations and balance sheet were as follows:

Year ended August 29, 2019

Amounts Without the Effects of Adoption of ASC 606

Cost of goods sold

Interest expense

Income tax (provision) benefit

Net income attributable to Micron

As of August 29, 2019

Amounts Without the Effects of Adoption of ASC 606

Other current assets

Deferred tax assets

Accounts payable and accrued expenses

Other current liabilities

Other noncurrent liabilities

Retained earnings

Recently Issued Accounting Standards Not Yet Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02 – Leases (as amended, “ASC 842”), which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of lease payments.

We adopted ASC 842 in the first quarter of 2020 under the modified retrospective method and elected to not recast prior periods.

We elected the practical expedients available under the transition guidance, including but not limited to, not reassessing past lease accounting or using hindsight to evaluate lease term.

In addition, we elected to not separate lease and non-lease components for real estate or gas plant leases.

As a result of adopting ASC 842, we recognized $ 567 million for operating lease liabilities and right-of-use assets and reclassified an additional $ 66 million of other balances to right-of-use assets to conform to the new presentation requirements of ASC 842.

55 | 2020 10-K

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06 – Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity , which simplifies the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract.

This ASU requires a convertible debt instrument to be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.

This ASU requires an entity to use the if-converted method in the diluted earnings per share calculation for convertible instruments.

This ASU will be effective for us in the first quarter of 2023, with early adoption permitted beginning in the first quarter of 2022, and permits the use of either the modified retrospective or fully retrospective method of transition.

We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In November 2018, the FASB issued ASU 2018-18 – Collaborative Arrangements , which clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer.

This ASU will be effective for us in the first quarter of 2021 with early adoption permitted.

This ASU requires retrospective adoption to the date we adopted ASC 606, which was August 31, 2018, by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented.

We do not anticipate the adoption of this ASU to have a material impact to our financial statements.

This ASU is effective for us in the first quarter of 2021 and requires retrospective adoption to the date we adopted ASC 606, which was August 31, 2018, by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented.

We do not anticipate the adoption of this ASU will have a significant impact on our financial statements.

In June 2016, the FASB issued ASU 2016-13 – Measurement of Credit Losses on Financial Instruments , which requires a financial asset (or a group of financial assets) measured on the basis of amortized cost to be presented at the net amount expected to be collected.

1 unchanged sentence

This ASU requires that credit losses of debt securities designated as available-for-sale be recorded through an allowance for credit losses and limits the credit loss to the amount by which fair value is below amortized cost.

This ASU will be effective for us in the first quarter of 2021 with adoption permitted as early as the first quarter of 2020.

This ASU requires modified retrospective adoption, with prospective adoption for debt securities for which an other-than-temporary impairment had been recognized before the effective date.

We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In February 2016, the FASB issued ASU 2016-02 – Leases , which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding liability, measured at the present value of lease payments.

We will adopt the provisions of this ASU under a modified retrospective method at the beginning of 2020 and not recast prior periods.

The adoption of this ASU will result in an increase to our consolidated balance sheet of approximately $550 million for operating lease liabilities and right-of-use assets.

Acquisition of Inotera

Through December 6, 2016, we held a 33% ownership interest in Inotera, now known as MTTW, Nanya and certain of its affiliates held a 32% ownership interest, and the remaining ownership interest was publicly held.

On December 6, 2016, we acquired the 67% remaining interest in Inotera not owned by us (the "Inotera Acquisition") and began consolidating Inotera's operating results.

The cash paid for the Inotera Acquisition was funded, in part, with proceeds from the 2021 MSTW Term Loan and the sale of the Micron Shares (as defined below) to Nanya.

Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taoyuan City, Taiwan.

From December 2015 until our acquisition of the remaining interest in Inotera, the price for DRAM products purchased by us was based on a formula that equally shared margin between Inotera and us.

Under these agreements, we purchased $504 million of DRAM products in 2017 through the date of our acquisition.

SG&A expenses for 2017 and 2016 included transaction costs of $13 million and $3 million , respectively, incurred in connection with the Inotera Acquisition.

In connection with the Inotera Acquisition, we revalued our previously-held 33% equity interest to its fair value.

In determining the fair value, we used various valuation techniques, including the share price of Inotera prior to the announcement of the Inotera Acquisition and discounted cash flow projections using inputs including discount rate and terminal growth rate (Level 3).

As a result, we recognized a non-operating gain of $71 million in 2017.

In connection with the Inotera Acquisition, we sold 58 million shares of our common stock to Nanya (the "Micron Shares") and received cash proceeds of $986 million .

Because the sale of the Micron Shares to Nanya was contemporaneous with, and contingent upon, the closing of the Inotera Acquisition, the issuance of the Micron Shares was treated in purchase accounting as a non-cash exchange for a portion of the shares of Inotera held by Nanya.

The Micron Shares were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and were subject to certain restrictions on transfers at the time of sale.

To reflect the lack of transferability, the fair value of the Micron Shares (based on the trading price of our common stock on the acquisition date) was reduced by a discount of $81 million , based on the implied volatility derived from traded options on our stock and on the duration of the lack of transferability (Level 2).

The allocation of purchase price to assets acquired and liabilities assumed of Inotera was as follows:

Consideration

Cash paid for Inotera Acquisition

Less cash received from sale of Micron Shares

Net cash paid for Inotera Acquisition

Fair value of our previously-held equity interest in Inotera

Fair value of Micron Shares exchanged for Inotera shares

Payments attributed to intercompany balances with Inotera

Assets acquired and liabilities assumed

Cash and equivalents

Other current assets

Property, plant, and equipment

Deferred tax assets

Other noncurrent assets

Accounts payable and accrued expenses

Other noncurrent liabilities

The Inotera Acquisition enhanced our flexibility to drive new technology, optimized the deployment of capital, and enabled us to adapt our product offerings to changes in market conditions.

As a result of these synergies, we allocated goodwill of $829

million , $198 million , and $97 million to CNBU, MBU, and EBU, respectively.

Goodwill resulting from the Inotera Acquisition is not deductible for Taiwan corporate income tax purposes;

however, it is deductible for Taiwan surtax purposes.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations as if the Inotera Acquisition had occurred on September 4, 2015.

The pro forma financial information includes the accounting effects of the business combination, including adjustments for depreciation of property, plant, and equipment, interest expense, elimination of intercompany activities, and revaluation of inventories.

The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the Inotera Acquisition occurred on September 4, 2015.

Net income attributable to Micron

Earnings per share

The unaudited pro forma financial information for 2017 includes our results for the year ended August 31, 2017 (which includes the results of Inotera since our acquisition of Inotera on December 6, 2016), the results of Inotera for the three months ended November 30, 2016, and the adjustments described above.

Technology Transfer and License Agreements with Nanya

Effective December 6, 2016, the terms of technology transfer and license agreements provided Nanya with options to require us to transfer to Nanya certain technology for Nanya's use and deliverables related to the next DRAM process node generation after our 20nm process node (the "1X Process Node") and the next DRAM process node generation after the 1X Process Node (the "1Y Process Node").

Nanya's option for the 1X Process Node expired unexercised.

If Nanya exercises its right for the 1Y Process Node, Nanya would pay us royalties for a license to the transferred 1Y Process Node technology based on revenues from products utilizing the technology, subject to specified caps, and we would also receive an equity interest in Nanya upon the achievement of certain milestones.

This ASU is effective for us in the first quarter of 2021 and requires modified retrospective adoption, with prospective adoption for debt securities for which an other-than-temporary impairment had been recognized before the effective date.

We do not anticipate the adoption of this ASU will have a significant impact on our financial statements.

Cash and Investments

1 unchanged sentence

Cash and equivalents and the fair values of our available-for-sale investments, which approximated amortized costs, were as follows:

Cash and Equivalents

Short-term Investments

Long-term Marketable Investments (1)

Total Fair Value

Cash and Equivalents

Short-term Investments

Long-term Marketable Investments (1)

As of Cash and Equivalents Short-term Investments Long-term Marketable Investments (1)

Total Fair Value Cash and Equivalents Short-term Investments Long-term Marketable Investments (1)

Total Fair Value

Cash $ 3,996 $ — $ — $ 3,996 $ 2,388 $ — $ — $ 2,388

Money market funds 1,828 — — 1,828 3,418 — — 3,418

4 unchanged sentences

Commercial paper 50 96 — 146 18 24 — 42

7,624 $ 518 $ 1,048 $ 9,190 7,152 $ 803 $ 1,164 $ 9,119

Restricted cash (4)

4 unchanged sentences

We perform supplemental analysis to validate information obtained from these pricing services.

No adjustments were made to the fair values indicated by such pricing information as of August 29, 2019 or August 30, 2018 .

Restricted cash is included in other noncurrent assets and primarily relates to the MMJ Creditor Payments and government incentives received prior to being earned.

The restrictions lapse on the MMJ Creditor Payments upon approval by the trustees and/or Tokyo District Court and for the government incentives upon achieving certain performance conditions.

Gross realized gains and losses from sales of available-for-sale securities were not material for any period presented.

As of August 29, 2019 , there were no available-for-sale securities that had been in a loss position for longer than 12 months.

No adjustments were made to the fair values indicated by such pricing information as of September 3, 2020 or August 29, 2019.

(4) Restricted cash is included in other noncurrent assets and primarily relates to certain government incentives received prior to being earned and for which restrictions lapse upon achieving certain performance conditions.

Restricted cash as of August 29, 2019 also included amounts related to the corporate reorganization proceedings of MMJ.

Gross realized gains and losses from sales of available-for-sale securities were not significant for any period presented.

As of September 3, 2020, there were no available-for-sale securities that had been in a loss position for longer than 12 months.

As of 2020 2019

Trade receivables $ 3,494 $ 2,778

Income and other taxes 232 242

Other 186 175

$ 3,912 $ 3,195

57 | 2020 10-K

As of 2020 2019

Finished goods $ 1,001 $ 757

1 unchanged sentence

Raw materials and supplies 752 536

$ 5,607 $ 5,118

Property, Plant, and Equipment

Buildings (includes $528 and $483, respectively, under capital leases)

Equipment (1) (includes $905 and $1,336, respectively, under capital leases)

As of 2020 2019

Land $ 352 $ 352

Buildings 13,981 10,931

Equipment (1)

48,525 44,051

Construction in progress (2)

Accumulated depreciation (includes $733 and $868, respectively, under capital leases)

Included costs related to equipment not placed into service of $2.33 billion as of August 29, 2019 and $1.73 billion as of August 30, 2018 .

Software 873 790

65,331 57,824

Accumulated depreciation ( 34,300 ) ( 29,584 )

$ 31,031 $ 28,240

(1) Included costs related to equipment not placed into service of $ 1.63 billion as of September 3, 2020 and $ 2.33 billion as of August 29, 2019.

(2) Included building-related construction, tool installation, and software costs for assets not placed into service.

1 unchanged sentence

Interest capitalized as part of the cost of property, plant, and equipment was $ 77 million, $ 103 million, and $ 44 million for 2020, 2019, and 2018, respectively.

We periodically assess the estimated useful lives of our property, plant, and equipment.

Based on our assessment of planned technology node transitions, capital spending, and re-use rates, we revised the estimated useful lives of the existing equipment in our NAND wafer fabrication facilities and our research and development (“R&D”) facilities from five years to seven years as of the beginning of the first quarter of 2020.

This revision reduced our aggregate depreciation expense by approximately $ 675 million in 2020, of which approximately $ 165 million remained capitalized in inventory as of the end of 2020.

After adjusting for the effect of the reduced amount of depreciation expense remaining in inventory, the revision in estimated useful lives benefited both operating income and net income by approximately $ 510 million and diluted earnings per share by approximately $ 0.45 for 2020.

Intangible Assets and Goodwill

Amortizing assets

Amount Accumulated

Amortization Gross

Amount Accumulated

Product and process technology $ 616 $ ( 282 ) $ 583 $ ( 243 )

Non-amortizing assets

In-process R&D

Total intangible assets

Goodwill 1,228 1,228

In 2020, 2019, and 2018, we capitalized $ 73 million, $ 91 million, and $ 48 million, respectively, for product and process technology with weighted-average useful lives of 10 years, 8 years, and 10 years, respectively.

In 2019, we placed $108 million of in-process R&D in service, which is being amortized on a straight-line basis over six years.

Expected amortization expense for our intangible assets is $72 million for 2020 , $62 million for 2021 , $50 million for 2022 , $44 million for 2023 , and $40 million for 2024 .

In 2019, we placed $ 108 million of in-process R&D in service and began amortizing it on a straight-line basis over six years .

Expected amortization expense is $ 73 million for 2021, $ 57 million for 2022, $ 51 million for 2023, $ 44 million for 2024, and $ 24 million for 2025.

We have finance and operating leases through which we acquire or utilize equipment and facilities in our manufacturing operations and R&D activities as well as office space and other facilities used in our SG&A functions.

Our finance leases consist primarily of gas or other supply agreements that are deemed to contain embedded leases in which we effectively control the underlying gas plants or other assets used to fulfill the supply agreements.

Our operating leases consist primarily of offices, other facilities, and land used in SG&A, R&D, and certain of our manufacturing operations.

Certain of our operating leases include one or more options to extend the lease term for periods from one year to 10 years for real estate and one year to 30 years for land.

Certain supply or service agreements require us to exercise significant judgment to determine whether the agreement contains a lease of a right-of-use asset.

Our assessment includes determining whether we or the supplier control the assets used to fulfill the supply or service agreement by identifying whether we or the supplier have the right to change the type, quantity, timing, or location of the output of the assets.

Our gas supply arrangements generally are deemed to contain a lease because we have the right to substantially all of the output of the assets used to produce the supply and we have the right to change the quantity and timing of the output of those assets.

In determining the lease term, we assess whether we are reasonably certain to exercise options to renew or terminate a lease, and when or whether we would exercise an option to purchase the right-of-use asset.

Measuring the present value of the initial lease liability requires exercising judgment to determine the discount rate, which we base on interest rates for similar borrowings issued by entities with credit ratings similar to ours.

Short-term and variable lease expenses were not significant and are presented within operating lease costs in the table below.

Sublease income was not significant in 2020.

The components of lease expense are presented below:

For the year ended 2020

Finance lease cost

Amortization of right-of-use asset $ 140

Interest on lease liability 22

Operating lease cost 102

Other information related to our leases were as follows:

For the year ended 2020

Cash flows used for operating activities

Finance leases

Operating leases (1)

Cash flows used for financing activities from financing leases 248

Noncash acquisitions of right-of-use assets

Finance leases 107

Operating leases

(1) Included $ 48 million of reimbursements received for tenant improvements.

59 | 2020 10-K

Finance lease right-of-use asset (included in property, plant, and equipment) ( 1)

Weighted-average remaining lease term (in years)

Finance leases

Operating leases

Weighted-average discount rate

Finance leases

Operating leases

(1) As of August 29, 2019, prior to our adoption of ASC 842, property, plant, and equipment included $ 700 million for finance leases.

Maturities of lease liabilities existing as of September 3, 2020 were as follows:

For the year ending Finance Leases Operating Leases

2021 $ 90 $ 70

2026 and thereafter 248 401

Less imputed interest ( 103 ) ( 120 )

The table above excludes any lease liabilities for leases that have been executed but have not yet commenced.

As of September 3, 2020, we had such lease liabilities relating to 1) operating lease payment obligations of $ 148 million for the initial 10 -year lease term for a building, which may, at our election, be terminated after 3 years or extended for an additional 10 years, and 2) finance lease obligations of $ 838 million over a weighted-average period of 15 years for gas supply arrangements deemed to contain embedded leases.

We will recognize right-of-use assets and associated lease liabilities at the time such assets become available for our use.

As of August 29, 2019, prior to our adoption of ASC 842, future minimum operating lease commitments with an initial term in excess of one year were $ 54 million for 2020, $ 64 million for 2021, $ 63 million for 2022, $ 59 million for 2023, $ 53 million for 2024, and $ 459 million in 2025 and thereafter.

Accounts Payable and Accrued Expenses

As of 2020 2019

Accounts payable $ 2,191 $ 1,677

2 unchanged sentences

Income and other taxes 237 309

Net Carrying Amount

Effective Rate

IMFT Member Debt

Capital lease obligations

MMJ Creditor Payments

2032D Notes (2)

2033F Notes (2)(3)

Net carrying amount is the principal amount less unamortized debt discount and issuance costs.

In addition, the net carrying amount as of August 29, 2019 and August 30, 2018 included $135 million and $132 million , respectively, of derivative debt liabilities recognized as a result of our election to settle entirely in cash converted notes with an aggregate principal amount of $44 million and $35 million , respectively.

Since the closing price of our common stock exceeded 130% of the conversion price per share for at least 20 trading days in the 30 trading day period ended on June 30, 2019, these notes are convertible by the holders through the calendar quarter ended September 30, 2019.

Additionally, the closing price of our common stock also exceeded the thresholds for the calendar quarter ended September 30, 2019;

therefore, these notes are convertible by the holders at any time through December 31, 2019.

Current debt as of August 29, 2019 included an aggregate of $179 million for the settlement obligation (including principal and amounts in excess of principal) for conversions of our 2033F Notes that settled in cash in the first quarter of 2020.

The remainder of the 2033F Notes were classified as current as of August 29, 2019 because the terms of these notes require us to pay cash for the principal amount of any converted notes and holders of these notes had the right to convert their notes as of that date.

Our convertible and other senior notes are unsecured obligations that rank equally in right of payment with all of our other existing and future unsecured indebtedness and are effectively subordinated to all of our other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness.

As of August 29, 2019 , Micron had $4.37

billion of unsecured debt (net of unamortized discount and debt issuance costs), including the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2029 Notes, 2030 Notes, 2032D Notes, and 2033F Notes that were structurally subordinated to all liabilities of its subsidiaries, including trade payables.

Other 166 163

$ 5,817 $ 4,626

Net Carrying Amount Net Carrying Amount

As of Stated Rate Effective Rate Principal Current Long-Term Total Principal Current Long-Term Total

Finance lease obligations

N/A 4.51 % $ 486 $ 76 $ 410 $ 486 $ 591 $ 223 $ 368 $ 591

2023 Notes 2.497 % 2.64 % 1,250 — 1,245 1,245 — — — —

4.640 % 4.76 % 600 — 598 598 600 — 597 597

2024 Term Loan A 1.420 % 1.47 % 1,250 62 1,186 1,248 — — — —

4.975 % 5.07 % 500 — 498 498 500 — 497 497

4.185 % 4.27 % 900 — 895 895 900 — 895 895

5.327 % 5.40 % 700 — 696 696 700 — 696 696

4.663 % 4.73 % 850 — 845 845 850 — 845 845

3.125 % 6.33 % 134 131 — 131 134 — 127 127

MMJ Creditor Payments N/A N/A 1 1 — 1 206 198 — 198

IMFT Member Debt N/A N/A — — — — 693 693 — 693

2025 Notes 5.500 % 5.56 % — — — — 519 — 516 516

2.125 % 2.13 % — — — — 62 196 — 196

$ 6,671 $ 270 $ 6,373 $ 6,643 $ 5,755 $ 1,310 $ 4,541 $ 5,851

As of September 3, 2020, all of our debt, other than our finance leases, are unsecured obligations that rank equally in right of payment with all of our other existing and future unsecured indebtedness and are effectively subordinated to all of our other existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness.

As of September 3, 2020, Micron had $ 6.16 billion of unsecured debt (net of unamortized discount and debt issuance costs) that was structurally subordinated to all liabilities of its subsidiaries, including trade payables.

The terms of our indebtedness generally contain cross payment default and cross acceleration provisions.

Micron guarantees certain debt obligations of its subsidiaries but does not guarantee the MMJ Creditor Payments.

Micron’s guarantees of its subsidiary debt obligations are unsecured obligations ranking equally in right of payment with all of Micron’s other existing and future unsecured indebtedness.

IMFT Member Debt

Pursuant to the terms of the IMFT joint venture agreement, Intel provided debt financing ("IMFT Member Debt") of $1.01 billion to IMFT in 2018.

IMFT Member Debt is non-interest bearing and is convertible, at the election of Intel, in whole or in part, into a capital contribution to IMFT.

Additionally, to the extent IMFT distributes cash to its members under the terms of the IMFT joint venture agreement, Intel may, at its option, designate any portion of the distribution to be a repayment of IMFT Member Debt.

The remaining balance of IMFT Member Debt on October 31, 2019 will be paid by Micron upon the closing of the IMFT transaction as a component of the consideration paid to Intel for their interest in IMFT.

As a result, it was classified as current as of August 29, 2019.

(See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)

Capital Lease Obligations

In 2019 , we recorded capital lease obligations aggregating $53 million at a weighted-average effective interest rate of 5.4% , with a weighted-average expected term of ten years.

In 2018 , we recorded capital lease obligations aggregating $20 million .

MMJ Creditor Payments

Under the MMJ Companies' corporate reorganization proceedings, which set forth the treatment of the MMJ Companies' pre-petition creditors and their claims, the MMJ Companies were required to pay 200 billion yen, less certain expenses of the reorganization proceedings and other items, to their secured and unsecured creditors in seven annual installment payments (the "MMJ Creditor Payments").

The MMJ Creditor Payments do not provide for interest and, as a result of our acquisition of the MMJ Companies in 2013, we recorded the MMJ Creditor Payments at fair value.

The fair-value discount is accreted to interest expense over the term of the installment payments.

Under the MMJ Companies' corporate reorganization proceedings, the secured creditors of MMJ recovered 100% of the amount of their fixed claims in six annual installment payments through October 2018 and the unsecured creditors will recover at least 17.4% of the amount of their fixed claims in seven annual installment payments through December 2019.

The remaining portion of the unsecured claims of the creditors of MMJ not recovered pursuant to the corporate reorganization proceedings will be discharged, without payment, through December 2019.

The following table presents the remaining MMJ Creditor Payment (stated in Japanese yen and U.S.

dollars) as of August 29, 2019 :

Less unamortized discount

In 2012, we entered into a series of agreements with the corporate reorganization trustees of the MMJ Companies and the MMJ Companies, including supply agreements, research and development services agreements, and general services agreements, which are intended to generate operating cash flows to meet the requirements of the MMJ Companies' businesses, including the funding of the MMJ Creditor Payments.

Senior Unsecured Notes

Our 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2029 Notes, and 2030 Notes (the "Senior Unsecured Notes") each contain covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries (which are generally domestic subsidiaries in which we own at least 80% of the voting stock) to (1) create or incur certain liens, (2) enter into certain sale and lease-back transactions, (3) consolidate with or merge with or into, or convey, transfer or lease all or substantially all of our assets, to another entity, and (4) for our 2025 Notes, create, assume, incur, or guarantee certain additional secured indebtedness and unsecured indebtedness of our domestic restricted subsidiaries.

Our 2023 Notes, 2024 Notes, 2026 Notes, 2027 Notes, 2029 Notes, and 2030 Notes (the “Senior Unsecured Notes”) each contain covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries (which are generally domestic subsidiaries in which we own at least 80 % of the voting stock and which own principal property, as defined in the indenture governing such notes) to (1) create or incur certain liens;

(2) enter into certain sale and lease-back transactions;

and (3) consolidate with or merge with or into, or convey, transfer, or lease all or substantially all of our properties and assets, to another entity.

These covenants are subject to a number of limitations and exceptions.

If a change in control triggering event occurs, as defined in

the indenture governing our Senior Unsecured Notes, we will be required to offer to purchase such notes at 101% of the outstanding aggregate principal amount plus accrued interest up to the purchase date.

Redemption at Our Option :

We may redeem the 2025 Notes, in whole or in part, at prices above the principal amount that decline over time, as specified in the indenture, together with accrued and unpaid interest.

We may redeem all other Senior Unsecured Notes, in whole or in part, at our option prior to their maturity at a price equal to accrued interest plus the present value of the remaining scheduled payments and we may redeem, in whole or in part, at a price equal to par between one and three months prior to maturity.

Convertible Senior Notes

Maturity Date

Conversion Price Per Share

Conversion Price Per Share Threshold (2)

Underlying Shares of Common Stock

Conversion Value in Excess of Principal (3)

Cash and/or shares

2033F Notes (5)

Debt discount and debt issuance costs are amortized through the earliest holder put date.

Represents 130% of the conversion price per share.

If the trading price of our common stock exceeds such threshold for a specified period, holders may convert such notes during a specified period.

See "Conversion Rights" below.

Based on the trading price of our common stock of $44.67 as of August 29, 2019 .

It is our current intent to settle in cash the principal amount of our convertible notes upon conversion.

As a result, only the amounts payable in excess of the principal amounts upon conversion of our convertible notes are considered in diluted earnings per share under the treasury stock method.

For each of our convertible notes, we may elect to settle any amounts in excess of the principal in cash, shares of our common stock, or a combination thereof.

Holders may put their notes to us on February 15, 2020 and on February 15, 2023.

Additionally, if a change of control triggering event occurs, as defined in the indentures governing our senior unsecured notes, we will be required to offer to purchase such notes at 101 % of the outstanding aggregate principal amount plus accrued interest up to the purchase date.

Credit Facility

Our credit facility provides for our Revolving Credit Facility and our 2024 Term Loan A, each of which generally bears interest at a rate equal to LIBOR plus 1.25 % to 2.00 %, depending on our corporate credit ratings or leverage ratio.

Under the terms of the credit facility, we must maintain ratios, calculated as of the last day of each fiscal quarter, of total indebtedness to adjusted EBITDA not to exceed 2.75 to 1.00 and adjusted EBITDA to net interest expense of not less than 3.50 to 1.00.

61 | 2020 10-K

As of September 3, 2020, borrowings under the credit facility were unsecured;

however, a security interest may be automatically instated upon a decline below a certain level in our corporate credit rating.

If the security interest is instated, any amounts drawn under the credit agreement would be collateralized by substantially all of the assets of Micron and MSP, subject to certain permitted liens.

The credit agreement contains other covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries to (1) create or incur certain liens and enter into sale and lease-back transactions, (2) create, assume, incur, or guarantee certain additional secured indebtedness and unsecured indebtedness of our restricted subsidiaries, and (3) consolidate with or merge with or into, or convey, transfer, lease, or otherwise dispose of all or substantially all of our assets, to another entity.

These covenants are subject to a number of limitations, exceptions, and qualifications.

Revolving Credit Facility :

On March 13, 2020, we drew the $ 2.50 billion available under our Revolving Credit Facility and on April 24, 2020, we repaid the $ 2.50 billion.

As of September 3, 2020, no amounts were outstanding under the Revolving Credit Facility and $ 2.50 billion was available to us.

Any amounts outstanding under the Revolving Credit Facility would mature in July 2023 and we may repay amounts borrowed any time without penalty.

The Revolving Credit Facility bears interest at a rate equal to LIBOR plus 1.25 % based on our current corporate credit rating and leverage ratio.

2024 Term Loan A :

On October 30, 2019, we drew the $ 1.25 billion available under our 2024 Term Loan A credit facility.

Principal payments are due annually in an amount equal to 5.0 % of the initial principal amount with the balance due at maturity in October 2024.

The 2024 Term Loan A facility bears interest at a rate equal to LIBOR plus 1.25 % based on our current corporate credit rating and leverage ratio.

2032D Convertible Senior Notes

Conversion Rights :

Holders of our convertible notes may convert their notes under the following circumstances:

Holders of the 2032D Notes may convert them under the following circumstances:

(1) if the notes are called for redemption;

(2) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of the conversion price (see "Conversion Price Per Share Threshold" in the table above);

(3) if the trading price of the notes is less than 98% of the product of the closing price of our common stock and the conversion rate of the notes during the periods specified in the indentures;

(2) during any calendar quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130 % of the conversion price (approximately $ 12.97 per share);

(3) if the trading price of the 2032D Notes is less than 98 % of the product of the closing price of our common stock and the conversion rate of the notes during the period specified in the indenture;

(4) if specified distributions or corporate events occur, as set forth in the indenture for the notes;

or (5) during the last three months prior to the maturity date of the notes.

For the calendar quarter ended September 30, 2019, the closing price of our common stock exceeded 130% of the conversion price for each series of our convertible notes;

therefore, those notes are convertible by the holders through December 31, 2019.

In August 2019, holders of our 2033F Notes with an aggregate principal amount of $44 million converted their notes, which were settled in cash the first quarter of 2020.

As a result of our election to settle all amounts due upon conversion in cash for these notes, such settlement obligations became derivative debt liabilities in 2019 subject to mark-to-market accounting treatment based on the volume-weighted-average price of our common stock over a period of 20 consecutive trading days.

Accordingly, at the dates of our elections to settle the conversions in cash, we reclassified the fair values of the equity components of each of the converted notes from additional capital to derivative debt liabilities within current debt in our consolidated balance sheet.

The net carrying amount for 2019 included $179 million for the fair values of the derivative debt liabilities as of August 29, 2019.

The 20 consecutive trading day period ended in the first quarter of 2020, and we settled the conversion for $192 million in cash.

or (5) at any time on or after February 1, 2032.

The closing price of our common stock exceeded 130 % of the conversion price for the 2032D Notes for at least 20 trading days in the 30 consecutive trading days ending on September 30, 2020.

As a result, the 2032D Notes are convertible by the holders through December 31, 2020.

As of September 3, 2020, the $ 46.33 trading price of our common stock was higher than the conversion price of our 2032D Notes and, as a result, the aggregate conversion value of $ 620 million exceeded the aggregate principal amount of $ 134 million by $ 486 million.

It is our current intent to settle in cash the principal amount of our 2032D Notes upon conversion.

As a result, only the amounts payable in excess of the principal amounts upon conversion of our 2032D Notes are considered in diluted earnings per share under the treasury stock method.

We may elect to settle any amounts in excess of the principal in cash, shares of our common stock, or a combination thereof.

Cash Redemption at Our Option :

We may redeem our convertible notes under the circumstances listed in the table below.

The redemption price for the notes will equal the principal amount at maturity plus accrued and unpaid interest.

Conditional Redemption Period

at Our Option (1)

Unconditional Redemption Period

at Our Option

Redemption Period Requiring

On or after May 1, 2017

On or after May 4, 2021

Prior to May 4, 2021 (2)

On or after Feb.

We may redeem for cash on or after the applicable dates if the volume weighted average price of our common stock has been at least 130% of the conversion price for at least 20 trading days during any 30 consecutive trading day period.

If we redeem prior to the applicable date, we will pay a make-whole premium in cash equal to the present value of the remaining scheduled interest payments from the redemption date to May 4, 2021.

We may redeem for cash the 2032D Notes if the volume weighted average price of our common stock has been at least 130 % of the conversion price (approximately $ 12.97 per share) for at least 20 trading days during any 30 consecutive trading day period.

The redemption price will equal the principal amount plus accrued and unpaid interest.

If we redeem the 2032D Notes prior to May 4, 2021, we will also pay a make-whole premium in cash equal to the present value of the remaining scheduled interest payments from the redemption date to May 4, 2021.

Cash Repurchase at the Option of the Holders :

We may be required by the holders of our convertible notes to repurchase for cash all or a portion of the notes on the "Holder Put Date" listed in the table above.

Holders of our 2032D Notes have the right to require us to repurchase for cash all or a portion of the notes on May 1, 2021.

As a result, our 2032D Notes are classified as current liabilities as of September 3, 2020.

Debt discount and issuance costs are amortized through the holder put date.

The repurchase price would equal the principal amount plus accrued and unpaid interest.

Also, upon a change in control or a termination of trading, as defined in the respective indentures, holders of our convertible notes may require us to repurchase for cash all or a portion of their notes.

Interest expense for our convertible notes consisted of contractual interest of $21 million , $44 million , and $51 million for 2019 , 2018 , and 2017 , respectively, and amortization of discount and issuance costs of $14 million , $32 million , and $37 million for 2019 , 2018 , and 2017 , respectively.

As of August 29, 2019 and August 30, 2018 , the carrying amounts of the equity components of our convertible notes, which are included in additional capital, were $29 million and $208 million , respectively.

Credit Facility

In July 2018, we entered into a credit agreement providing a committed revolving credit facility that matures in July 2023.

On November 27, 2018, we amended the credit agreement to increase the amount available to draw under the revolving credit facility from $2.0 billion to $2.5 billion .

On July 9, 2019, we entered into an incremental amendment to the credit agreement to obtain a term loan facility for up to $1.25 billion of financing.

We suspended the security interest in the collateral under the credit agreement in 2019 upon satisfying the requirements under the credit agreement, including achieving specified credit ratings and prepayment of the 2022 Term Loan B;

however, the security interest would be automatically reinstated upon a decline below a certain level in our corporate credit rating.

If the security interest is reinstated, any amounts drawn under the credit agreement would be collateralized by substantially all of the assets of Micron and MSP, subject to certain permitted liens.

Borrowings under either the revolving credit facility or the term loan facility will generally bear interest at a rate equal to LIBOR plus 1.25% to 2.00% , depending on our corporate credit ratings or leverage ratio.

We may elect to convert outstanding revolving or term loan interest to other variable-rate indexes.

The term loan facility may be drawn in a single advance prior to November 9, 2019.

If drawn, the term loan matures on the fifth anniversary of the funding date of the term loan.

Principal payments are due annually in an amount equal to 5.0% of the initial aggregate principal amount with the balance due at maturity.

As of August 29, 2019 , there were no outstanding amounts drawn under either the revolving credit facility or the term loan facility.

Under the terms of the credit agreement, we must maintain ratios, calculated as of the last day of each fiscal quarter, of total indebtedness to adjusted EBITDA not to exceed 2.75 to 1.00 and adjusted EBITDA to net interest expense of not less than 3.50 to 1.00 .

These covenants are subject to a number of limitations, exceptions, and qualifications.

Also, upon a change in control or a termination of trading, as defined in the indenture, holders of our 2032D Notes may require us to repurchase for cash all or a portion of their notes at a repurchase price equal to the principal amount plus accrued and unpaid interest.

Interest expense for all our convertible notes consisted of contractual interest of $ 4 million, $ 21 million, and $ 44 million for 2020, 2019, and 2018, respectively, and amortization of discount and issuance costs of $ 4 million, $ 14 million, and $ 32 million for 2020, 2019, and 2018, respectively.

As of September 3, 2020 and August 29, 2019, the carrying amounts of the equity components of our convertible notes, which are included in additional capital, were $ 27 million and $ 29 million, respectively.

IMFT Member Debt

In connection with our purchase of Intel’s noncontrolling interest in IMFT on October 31, 2019, we extinguished the remaining IMFT Member Debt as a component of the cash consideration paid to Intel for their interest in IMFT and recognized a non-operating gain of $ 72 million for the difference between the $ 505 million of cash consideration allocated to the extinguishment of IMFT Member Debt and its $ 577 million carrying value.

(See “Equity – Noncontrolling Interest in Subsidiary” for the cash consideration allocated to the repurchase of noncontrolling interest.) Prior to our acquisition of Intel’s interests in IMFT, IMFT repaid to Intel $ 116 million of IMFT Member Debt in the first quarter of 2020.

Debt Activity

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Accordingly, at the date of our election to settle a conversion in cash, we reclassify the fair value of the equity component of the converted notes from additional capital to derivative debt liability within current debt in our consolidated balance sheet.

Increase (Decrease) in Principal

Increase (Decrease) in Carrying Value

Increase (Decrease) in Cash

Decrease in Equity

2024 Notes (1)

2026 Notes (1)

2027 Notes (2)

Increase (Decrease) in Principal Increase (Decrease) in Carrying Value Increase (Decrease) in Cash Decrease in Equity Gain (Loss)

Revolving Credit Facility $ 2,500 $ 2,493 $ 2,500 $ — $ —

2023 Notes (1)

1,250 1,245 1,245 — —

2024 Term Loan A 1,250 1,248 1,248 — —

Revolving Credit Facility ( 2,500 ) ( 2,493 ) ( 2,500 ) — —

IMFT Member Debt ( 693 ) ( 693 ) ( 621 ) — 72

2025 Notes ( 519 ) ( 516 ) ( 534 ) — ( 18 )

2022 Term Loan B

Settled conversions

Conversions not settled

2033F Notes (2)

Issued February 6, 2019.

Issued July 12, 2019.

As of August 29, 2019 , an aggregate of $44 million principal amount of our 2033F Notes (with a carrying value of $179 million ) had converted but not settled.

These notes settled in the first quarter of 2020 for $192 million in cash.

In 2018, we repurchased or redeemed $6.96 billion of principal amount of notes (carrying value of $6.93 billion ) for an aggregate of $9.42 billion in cash and 4 million shares of our treasury stock.

( 62 ) ( 196 ) ( 266 ) ( 56 ) ( 14 )

$ 1,226 $ 1,088 $ 1,072 $ ( 56 ) $ 40

(1) Issued April 24, 2020 and due April 24, 2023.

(2) On March 27, 2020, we notified holders of our 2033F Notes that we would redeem all of the outstanding 2033F Notes on May 5, 2020.

Holders could elect to convert these notes through May 4, 2020, at a conversion rate of 91.4808 shares of our common stock per $1,000 of principal amount.

In connection with our notice, we made an irrevocable election to settle any conversions in cash.

Holders converted all of the 2033F Notes and on May 5, 2020, we paid $ 64 million to settle the conversions.

In 2019, we recognized aggregate non-operating losses of $ 396 million in connection with debt prepayments, repurchases, and conversions of $ 1.80 billion of principal amount of notes (carrying value of $ 1.60 billion) for an aggregate of $ 2.38 billion in cash.

As of August 29, 2019, an aggregate of $ 44 million principal amount of our 2033F Notes (with a carrying value of $ 179 million) had converted but not settled.

These notes settled in 2020 for $ 192 million in cash and the effect of the settlement is included in the table above.

In connection with these transactions, we recognized aggregate non-operating losses of $385 million in 2018.

In 2017, we repurchased or redeemed $1.55 billion of principal amount of notes (carrying value of $1.54 billion ) for an aggregate of $1.63 billion in cash.

In connection with these transactions, we recognized aggregate non-operating losses of $94 million in 2017.

Maturities of Notes Payable and Future Minimum Lease Payments

As of August 29, 2019 , maturities of notes payable (including the MMJ Creditor Payments) and future minimum lease payments under capital lease obligations were as follows:

Notes Payable

Capital Lease Obligations

2025 and thereafter

Unamortized discounts and interest, respectively

As of August 29, 2019 , we had commitments of approximately $7.6 billion of purchase obligations, a substantial majority of which will be due within five years.

Purchase obligations include payments for the acquisition of property, plant, and equipment, and other goods or services of either a fixed or minimum quantity.

We lease certain facilities and equipment under operating leases, for which expense was $93 million , $63 million , and $52 million for 2019 , 2018 , and 2017 , respectively.

Minimum future operating lease commitments as of August 29, 2019 were as follows:

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In 2018, we recognized aggregate non-operating losses of $ 385 million in connection with debt prepayments, repurchases, and conversions of $ 6.96 billion of principal amount of notes (carrying value of $ 6.93 billion) for an aggregate of $ 9.42 billion in cash and 4 million shares of our treasury stock.

As of August 30, 2018, an aggregate of $ 35 million principal amount of our 2033F Notes (with a carrying value of $ 165 million) had converted but not settled.

These notes settled in 2019 for $ 153 million in cash and the effect of the settlement is included in the amounts in the paragraph above.

Maturities of Notes Payable

As of September 3, 2020, maturities of notes payable were as follows:

2026 and thereafter 2,950

Unamortized discounts ( 28 )

As of September 3, 2020, we had commitments of approximately $ 5.2 billion for purchase obligations, a substantial majority of which will be due within one year .

Purchase obligations include payments for the acquisition of property, plant, and equipment, and other goods or services of either a fixed or minimum quantity and exclude any lease payments for leases that have been executed but have not yet commenced.

Contingencies

We have accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date, including those described below.

We are currently a party to other legal actions arising from the normal course of business, none of which is expected to have a material adverse effect on our business, results of operations, or financial condition.

We are currently a party to legal actions other than those described below arising from the normal course of business, none of which are expected to have a material adverse effect on our business, results of operations, or financial condition.

Patent Matters

As is typical in the semiconductor and other high-tech industries, from time to time, others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights.

On August 12, 2014, MLC Intellectual Property, LLC filed a patent infringement action against Micron in the United States District Court for the Northern District of California.

On August 12, 2014, MLC Intellectual Property, LLC filed a patent infringement action against Micron in the U.S.

District Court for the Northern District of California.

The complaint alleges that Micron infringes a single U.S.

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On March 27, 2015, Elm filed an amended complaint against the same entities.

The amended complaint alleges that

unspecified semiconductor products of ours that incorporate multiple stacked die infringe 13 U.S.

The amended complaint alleges that unspecified semiconductor products of ours that incorporate multiple stacked die infringe 13 U.S.

patents and seeks damages, attorneys’ fees, and costs.

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patents and seeks damages, attorneys’ fees, and costs.

On July 23, 2018, IMS served a patent infringement complaint on Micron Semiconductor (Deutschland) GmbH and Micron Europe Limited in the Regional Court, Mannheim, Germany alleging that products including our SSDs infringe a European patent.

The complaint seeks unspecified damages and an order forbidding Micron Semiconductor (Deutschland) GmbH and Micron Europe Limited from offering to sell, using, and importing the accused products.

On June 7, 2019, the Regional Court found no infringement and dismissed the case.

On August 31, 2018, Micron was served with a complaint filed by IMS in Shenzhen Intermediate People’s Court in Guangdong Province, China.

The complaint alleges that certain of our NAND flash products infringe a Chinese patent.

The complaint seeks an order requiring Micron to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 1 million Chinese yuan plus expenses.

November 12, 2019, IMS filed an amended complaint in the same court.

The amended complaint alleges that certain of our NAND flash products infringe a Chinese patent.

The complaint seeks an order requiring Micron to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages and costs of 21 million Chinese yuan.

On August 4, 2020, the China National Intellectual Property Administration ruled invalid each of the asserted claims in the Chinese patent matter.

On August 17, 2020, IMS withdrew its complaint filed in Shenzhen Intermediate People’s Court.

On March 19, 2018, Micron Semiconductor (Xi’an) Co., Ltd.

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The complaint alleges that MXA and MSS infringe a Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules.

The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages of 98 million Chinese yuan plus court fees incurred.

The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China;

to stop manufacturing, using, selling, and offering for sale the accused products in China;

and to pay damages of 98 million Chinese yuan plus court fees incurred.

On March 21, 2018, MXA was served with a patent infringement complaint filed by United Microelectronics Corporation (“UMC”) in the Fuzhou Court.

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The complaint alleges that MXA and MSS infringe a Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules.

The complaint seeks an order requiring MXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China;

to stop manufacturing, using, selling, and offering for sale the accused products in China;

and to pay damages of 90 million Chinese yuan plus court fees incurred.

On April 3, 2018, MSS was served with another patent infringement complaint filed by Jinhua and two additional complaints filed by UMC in the Fuzhou Court.

The three additional complaints allege that MSS infringes three Chinese patents by manufacturing and selling certain Crucial MX300 SSDs and certain GDDR5 memory chips.

The two complaints filed by UMC each seek an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China, to stop manufacturing, using, selling, and offering for sale the accused products in China, and to pay damages for each complaint of 90 million Chinese yuan plus court fees incurred.

The two complaints filed by UMC each seek an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China;

to stop manufacturing, using, selling, and offering for sale the accused products in China;

and to pay damages for each complaint of 90 million Chinese yuan plus court fees incurred.

The complaint filed by Jinhua seeks an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China;

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On October 9, 2018, UMC withdrew its complaint that alleged MSS infringed a Chinese patent by manufacturing and selling certain GDDR5 memory chips.

On July 5, 2018, MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins them from manufacturing, selling, or importing certain Crucial and Ballistic-branded DRAM modules and solid-state drives in China.

The affected products make up slightly more than 1% of our annualized revenues.

On July 5, 2018, MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins them from manufacturing, selling, or importing certain Crucial and Ballistix-branded DRAM modules and solid-state drives in China.

The affected products made up slightly more than 1 % of our annualized revenue in 2018.

We are complying with the ruling and have requested the Fuzhou Court to reconsider or stay its decision.

Among other things, the above lawsuits pertain to substantially all of our DRAM, NAND, and other memory and storage products we manufacture, which account for a significant portion of our revenue.

On May 4, 2020, Flash-Control, LLC (“Flash-Control”) filed a patent infringement action against Micron in the U.S.

District Court for the Western District of Texas.

The complaint alleges that four U.S.

patents are infringed by unspecified DDR4 SDRAM, NVRDIMM, NVDIMM, 3D XPoint, and/or SSD products that incorporate memory controllers and flash memory.

The complaint seeks damages, attorneys’ fees, and costs.

Among other things, the above lawsuits pertain to substantially all of our DRAM, NAND, and other memory and storage products we manufacture, which account for substantially all of our revenue.

On January 20, 2011, Dr.

Michael Jaffé, administrator for Qimonda's insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., ("Micron B.V."), in the District Court of Munich, Civil Chamber.

Michael Jaffé, administrator for Qimonda’s insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V.

(“Micron B.V.”), in the District Court of Munich, Civil Chamber.

The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V.

and Qimonda signed in fall 2008, pursuant to which Micron B.V.

purchased substantially all of Qimonda's shares of Inotera (the "Inotera Shares"), representing approximately 18% of Inotera's outstanding shares as of August 29, 2019 , and seeks an order requiring us to re-transfer those shares to the Qimonda estate.

The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.

purchased substantially all of Qimonda’s shares of Inotera (the “Inotera Shares”), representing approximately 18 % of Inotera’s outstanding shares at that time, and seeks an order requiring us to re-transfer those shares to the Qimonda estate.

The complaint also seeks, among

65 | 2020 10-K

other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.

Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the court issued judgments:

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from ownership of the Inotera Shares.

The interlocutory judgments have no immediate, enforceable effect on us, and, accordingly, we expect to be able to continue to operate with full control of the Inotera Shares subject to further developments in the case.

The interlocutory judgments had no immediate, enforceable effect and Micron, accordingly, has been able to continue to operate with full control of the Inotera Shares subject to further developments in the case.

On April 17, 2014, Micron and Micron B.V.

filed a notice of appeal with the German Appeals Court challenging the District Court’s decision.

After opening briefs, the Appeals Court held a hearing on the matter on July 9, 2015, and thereafter appointed two independent experts to perform an evaluation of Dr.

After opening briefs, the Appeals Court held a hearing on the matter on July 9, 2015, and thereafter appointed an independent expert to perform an evaluation of Dr.

Jaffé’s claims that the amount Micron paid for Qimonda was less than fair market value.

On January 25, 2018, the court-appointed experts issued their report concluding that the amount paid by Micron was within an acceptable fair-value range.

The Appeals Court held a subsequent hearing on April 30, 2019, and on May 28, 2019, the Appeals Court remanded the case to the experts for supplemental expert opinion.

On January 25, 2018, the court-appointed expert issued a report concluding that the amount paid by Micron was within an acceptable fair-value range.

The Appeals Court held a subsequent hearing on April 30, 2019, and on May 28, 2019, the Appeals Court remanded the case to the expert for supplemental expert opinion.

On March 31, 2020, the expert presented a revised opinion to the Appeals Court which reaffirmed the earlier view that the amount paid by Micron was still within an acceptable range of fair value.

Antitrust Matters

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Subsequently, two substantially identical cases were filed in the same court.

The lawsuits purport to be on behalf of a nationwide class of indirect purchasers of DRAM products.

The complaints assert claims based on alleged price-fixing of DRAM products under federal and state law during the period from June 1, 2016 to February 1, 2018, and seek treble monetary damages, costs, interest, attorneys' fees, and other injunctive and equitable relief.

On September 3, 2019, the District Court granted Micron's motion to dismiss and allowed plaintiffs the opportunity to file an amended complaint.

The lawsuits purported to be on behalf of a nationwide class of indirect purchasers of DRAM products.

On September 3, 2019, the District Court granted Micron’s motion to dismiss and allowed plaintiffs the opportunity to file a consolidated, amended complaint.

On October 28, 2019, the plaintiffs filed a consolidated amended complaint that purports to be on behalf of a nationwide class of indirect purchasers of DRAM products.

The amended complaint asserts claims based on alleged price-fixing of DRAM products under federal and state law during the period from June 1, 2016 to at least February 1, 2018, and seeks treble monetary damages, costs, interest, attorneys’ fees, and other injunctive and equitable relief.

On June 26, 2018, a complaint was filed against Micron and other DRAM suppliers in the U.S.

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Subsequently, four substantially identical cases were filed in the same court.

The lawsuits purport to be on behalf of a nationwide class of direct purchasers of DRAM products.

On October 28, 2019, the plaintiffs filed a consolidated, amended complaint.

The consolidated complaint purports to be on behalf of a nationwide class of direct purchasers of DRAM products.

The consolidated complaint asserts claims based on alleged price-fixing of DRAM products under federal and state law during the period from June 1, 2016 through at least February 1, 2018, and seeks treble monetary damages, costs, interest, attorneys’ fees, and other injunctive and equitable relief.

Additionally, six cases have been filed in the following Canadian courts:

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District Court for the Southern District of New York.

The lawsuit purports to be brought on behalf of a class of purchasers of our stock during the period from June 22, 2018 through November 19, 2018.

The lawsuit purported to be brought on behalf of a class of purchasers of our stock during the period from June 22, 2018 through November 19, 2018.

Subsequently two substantially similar cases were filed in the same court adding one of our former officers, Ernie Maddock, as a defendant and alleging a class action period from September 26, 2017 through November 19, 2018.

The separate cases were joined, and a consolidated amended complaint was filed on June 15, 2019.

The consolidated amended complaint alleges that defendants committed securities fraud through misrepresentations and omissions about purported anticompetitive behavior in the DRAM industry and seek compensatory and punitive damages, fees, interest, costs, and other appropriate relief.

The consolidated amended complaint alleged that defendants committed securities fraud through misrepresentations and omissions about purported anticompetitive behavior in the DRAM industry and sought compensatory and punitive damages, fees, interest, costs, and other appropriate relief.

On October 2, 2019, the parties submitted a joint stipulation to dismiss the complaint.

The Court approved the stipulation and dismissed the complaint on October 3, 2019.

On March 5, 2019, a shareholder derivative complaint was filed in the U.S.

District Court for the District of Delaware, allegedly on behalf of and for the benefit of Micron, against certain current and former officers and directors of Micron for alleged breaches of their fiduciary duties and other violations of law.

The allegations are based on, among other things, purported false and misleading statements regarding anticompetitive behavior in the DRAM industry.

On March 5, 2019, a derivative complaint was filed by a shareholder in the U.S.

District Court for the District of Delaware, based on similar allegations to the securities fraud cases, allegedly on behalf of and for the benefit of Micron, against certain current and former officers and directors of Micron for alleged breaches of their fiduciary duties and other violations of law.

The complaint seeks damages, fees, interest, costs, and other appropriate relief.

Similar shareholder derivative complaints have subsequently been filed in the U.S.

Similar shareholder derivative complaints were subsequently filed in the U.S.

District Court for the District of Delaware and the U.S.

District Court for the District of Idaho.

On November 20, 2019, the plaintiff in the second action filed in the U.S.

District Court for the District of Delaware voluntarily dismissed his complaint.

On November 21, 2019, the plaintiff voluntarily dismissed his complaint that was filed in the U.S.

District Court for the District of Idaho.

On December 5, 2017, Micron filed a complaint against UMC and Jinhua in the U.S.

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Micron’s complaint seeks damages, restitution, disgorgement of profits, injunctive relief, and other appropriate relief.

On June 13, 2019, current Micron employee Chris Manning filed a putative class action lawsuit on behalf of Micron employees subject to the Idaho Claim Act who earned a performance-based bonus after the conclusion of fiscal year 2018 whose performance rating was calculated based upon a mandatory percentage distribution range of performance ratings.

On behalf of himself and the putative class, Manning asserts claims for violation of the Idaho Wage Claim Act, breach of contract, breach of the covenant of good faith and fair dealing, and fraud.

In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party.

On June 13, 2019, current Micron employee Chris Manning filed a putative class action lawsuit on behalf of Micron employees subject to the Idaho Wage Claim Act who earned a performance-based bonus after the conclusion of 2018 whose performance rating was calculated based upon a mandatory percentage distribution range of performance ratings.

On July 12, 2019, Manning and three other Company employees filed an amended complaint as putative class action representatives.

On behalf of themselves and the putative class, Manning and the three other plaintiffs assert claims for violation of the Idaho Wage Claim Act, breach of contract, breach of the covenant of good faith and fair dealing, and fraud.

On June 24, 2020, the court entered judgment in favor of Micron based on the statute of limitations, and the plaintiffs filed a notice of appeal on July 23, 2020.

On July 31, 2020, Micron and Intel entered into a binding arbitration agreement under which the parties agreed to present to an arbitral panel various financial disputes related to the IMFT joint venture between Micron and Intel, which ended October 31, 2019, and to other agreements relating to the joint development, production, and sale of non-volatile memory products.

Each party alleges that the other owes damages relating to allegations of breach of one or more agreements.

In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify another party.

It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement.

Historically, our payments under these types of agreements have not had a material adverse effect on our business, results of operations, or financial condition.

We are unable to predict the outcome of the patent matters, the Qimonda matter, antitrust matters, securities matters, and other matters noted above and therefore cannot estimate the range of possible loss.

We are unable to predict the outcome of the patent matters, Qimonda matter, antitrust matters, securities matter, binding arbitration with Intel, or any other matters noted above, and therefore cannot estimate the range of possible loss.

A determination that our products or manufacturing processes infringe the intellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes.

Any of the foregoing, as well as the resolution of any other legal matter noted above, could have a material adverse effect on our business, results of operations, or financial condition.

Redeemable Convertible Notes

Under the terms of the indentures governing our 2033F Notes, upon conversion, we would be required to pay cash equal to the lesser of (1) the aggregate principal amount or (2) the conversion value of the notes being converted.

To the extent the conversion value exceeds the principal amount, we could pay cash, shares of common stock, or a combination thereof, at our option, for the amount of such excess.

The closing price of our common stock met the threshold for conversion and our 2033F Notes were convertible by their holders as of August 29, 2019 and August 30, 2018.

As a result, the balance of these notes was classified as current debt and the difference between the principal amount and the carrying value was classified as redeemable convertible notes.

Any of the foregoing, as well

67 | 2020 10-K

as the resolution of any other legal matter noted above, could have a material adverse effect on our business, results of operations, or financial condition.

Redeemable Noncontrolling Interest

Redeemable noncontrolling interest reflects 100,000 preferred shares authorized and issued by Micron Semiconductor Asia Operations Pte.

("MSAO") in 2018 for proceeds, net of issuance related costs, of $97 million .

Holders of the preferred shares are entitled to receive a cumulative dividend of 7.75% per annum, to be paid from the profits of MSAO on the last day of each quarter and a liquidation preference senior to MSAO's common shares.

We recognize the accrued dividend in net income attributable to noncontrolling interests.

Holders may require us to purchase their shares after August 29, 2028, and we have the right to reacquire the shares during the period beginning August 31, 2020 through August 29, 2026, each for par value per share plus accrued dividends.

Redeemable noncontrolling interest as of August 29, 2019 reflected 100,000 preferred shares authorized and issued by Micron Semiconductor Asia Operations Pte.

(“MSAO”) in 2018 for net proceeds of $ 97 million.

Holders of the preferred shares were entitled to receive a cumulative dividend of 7.75 % per annum.

On August 31, 2020, we redeemed the shares for $ 102 million.

Micron Shareholders’ Equity

Common Stock Repurchases :

Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock beginning in fiscal 2019.

We may purchase shares on a discretionary basis through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions and our ongoing determination of the best use of available cash.

The repurchase authorization does not obligate us to acquire any common stock.

In 2019, we repurchased 67 million shares of our common stock for $2.66 billion under an accelerated share repurchase agreement, Rule 10b5-1 plans, and through open market repurchases.

The shares were recorded as treasury stock.

Our Board of Directors has authorized the discretionary repurchase of up to $ 10 billion of our outstanding common stock beginning in 2019.

We may purchase shares through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans.

The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash.

We repurchased 3.6 million shares of our common stock for $ 176 million in 2020 and 66.4 million shares for $ 2.66 billion in 2019.

Through September 3, 2020, we had repurchased an aggregate of $ 2.84 billion under the authorization.

The repurchased shares were recorded as treasury stock.

Common Stock Issuance :

In 2018, we issued 34 million shares of our common stock for $ 41.00 per share in a public offering, for net proceeds of $ 1.36 billion, net of underwriting fees and other offering costs.

Treasury Stock :

In connection with the Inotera Acquisition, we sold 58 million shares of our common stock to Nanya for $986 million in cash, of which 54 million shares were issued from treasury stock.

As a result, in 2017, treasury stock decreased by $1.03 billion while retained earnings decreased by $104 million for the difference between the carrying value of the treasury stock and its $925 million fair value.

Outstanding Capped Calls :

In connection with our 2033F Notes, we entered into the 2033F Capped Calls, which cover, subject to anti-dilution adjustments similar to those contained in the 2033F Notes, 27 million shares of common stock and are intended to reduce the effect of potential dilution.

The 2033F Capped Calls have an initial strike price of $10.93 , subject to certain adjustments, which equals the conversion price of the 2033F Notes, a cap price of $14.51 , and provide for our receipt of cash or shares, at our election, from our counterparties if the trading price of our stock is above the strike prices on the expiration dates.

The 2033F Capped Calls expire on various dates between January 2020 and February 2020.

As of August 29, 2019 , the dollar value of cash or shares that we would receive from our 2033F Capped Calls upon their expiration dates range from $0 , if the trading price of our stock is below the strike prices at expiration, to $98 million , if the trading price of our stock is at or above the cap prices.

Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration.

Expiration of Capped Calls :

In 2018, we share-settled certain capped calls upon their expirations, and received 9 million shares, equal to a value of $429 million .

In 2017, we cash-settled and share-settled certain capped calls upon their expirations, and received $125 million in cash and 4 million shares, equal to a value of $67 million .

The amounts received upon settlement were based on volume-weighted-average trading prices of our stock at the expiration dates.

Capped Calls :

In 2020, we share-settled all outstanding capped calls upon their expiration and received an aggregate of 1.7 million shares of our common stock, equal to a value of $ 98 million.

In 2018, we share-settled certain other capped calls upon their expirations, and received 9.2 million shares, equal to a value of $ 429 million.

Amounts received upon settlement were based on volume-weighted-average trading prices of our stock at the expiration dates.

The shares received in all periods were recorded as treasury stock.

Accumulated Other Comprehensive Income :

Changes in accumulated other comprehensive by component for the year ended August 29, 2019 were as follows:

Pension Liability Adjustments

Gains (Losses) on Derivative Instruments

Cumulative Foreign Currency Translation Adjustment

Unrealized Gains (Losses) on Investments

Changes in accumulated other comprehensive income by component for the year ended September 3, 2020 were as follows:

Gains (Losses) on Derivative Instruments Pension Liability Adjustments Unrealized Gains (Losses) on Investments Cumulative Foreign Currency Translation Adjustment Total

As of August 29, 2019 $ ( 1 ) $ 4 $ 7 $ ( 1 ) $ 9

Other comprehensive income

Other comprehensive income before reclassifications 51 25 8 — 84

Amount reclassified out of accumulated other comprehensive income 4 ( 3 ) ( 6 ) — ( 5 )

Other comprehensive income

As of August 29, 2019

Noncontrolling Interests in Subsidiaries

Since 2006, we have owned 51% of IMFT, a joint venture between us and Intel.

IMFT is governed by a Board of Managers, for which the number of managers appointed by each member varies based on the members' respective ownership interests.

IMFT manufactures semiconductor products exclusively for its members under a long-term supply agreement at prices approximating cost.

( 9 ) ( 7 ) ( 1 ) — ( 17 )

Other comprehensive income (loss) 46 15 1 — 62

As of September 3, 2020 $ 45 $ 19 $ 8 $ ( 1 ) $ 71

Noncontrolling Interest in Subsidiary

As of Balance Percentage Balance Percentage

IMFT $ — — % $ 889 49 %

On October 31, 2019, we purchased Intel’s noncontrolling interest in IMFT, now known as MTU, and IMFT Member Debt for $ 1.25 billion.

In connection therewith, we recognized a $ 160 million adjustment to equity for the difference between the $ 744 million of cash consideration allocated to Intel’s noncontrolling interest and its $ 904 million carrying value.

(See “Debt” for the cash consideration allocated to, and extinguishment of, IMFT Member Debt.)

IMFT manufactured semiconductor products exclusively for its members under a long-term supply agreement at prices approximating cost.

In 2018, IMFT discontinued production of NAND and subsequent to that time manufactured 3D XPoint memory.

In 2018, we announced that we and Intel will no longer jointly develop 3D XPoint technology beyond the second generation and we substantially completed this cost-sharing arrangement in the first quarter of 2020.

IMFT sales to Intel were $731 million , $507 million , and $493 million for 2019 , 2018 , and 2017 , respectively.

IMFT's capital requirements are generally determined based on an annual plan approved by the members, and capital contributions to IMFT are requested as needed.

Capital requests are made to the members in proportion to their then-current ownership interest.

Members may elect to not contribute their proportional share, and in such event, the contributing member may elect to contribute any amount of the capital request, either in the form of an equity contribution or member debt financing.

Under the supply agreement, the members have rights and obligations to the capacity of IMFT in proportion to their investment, including member debt financing.

Any capital contribution or member debt financing results in a proportionate adjustment to the sharing of output on an eight -month lag.

Pursuant to the terms of the IMFT joint venture agreement, Intel provided debt financing of $1.01 billion to IMFT in 2018 and IMFT repaid $316 million to Intel in 2019.

As of August 29, 2019 , current debt included $693 million of IMFT Member Debt.

Members pay their proportionate share of fixed costs associated with IMFT's capacity.

In January 2019, we exercised our option to acquire Intel's interest in IMFT.

Subsequently, Intel set the closing date to occur on October 31, 2019, at which time IMFT will become a wholly-owned subsidiary.

In the first quarter of 2020, we expect to pay Intel approximately $1.4 billion in cash for Intel's noncontrolling interest in IMFT and IMFT member debt.

Pursuant to the terms of the IMFT wafer supply agreement, Intel notified us of its election to receive supply from IMFT from the closing date through April 2020 at a volume equal to approximately 50% of their volume from IMFT in the six -month period prior to closing.

Creditors of IMFT have recourse only to IMFT's assets and do not have recourse to any other of our assets.

The following table presents the assets and liabilities of IMFT included in our consolidated balance sheets:

Cash and equivalents

Other current assets

Total current assets

Property, plant, and equipment

Other noncurrent assets

Accounts payable and accrued expenses

Other current liabilities

Total current liabilities

Long-term debt

Other noncurrent liabilities

Total liabilities

Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.

IMFT sales to Intel were $ 158 million through the date of our purchase of Intel’s noncontrolling interest in 2020, $ 731 million in 2019, and $ 507 million in 2018.

Fair Value Measurements

Substantially all of our marketable debt and equity investments were classified as available-for-sale and carried at fair value.

Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value.

The estimated fair value and carrying value of our outstanding debt instruments (excluding the carrying value of equity and mezzanine equity components of our convertible notes) were as follows:

The estimated fair values and carrying values of our outstanding debt instruments (excluding the carrying value of equity components of our convertible notes) were as follows:

Value Carrying

Notes and MMJ Creditor Payments $ 6,710 $ 6,026 $ 5,194 $ 4,937

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The fair values of our other debt instruments were estimated based on Level 2 inputs, including discounted cash flows, the trading price of our notes when available, and interest rates based on similar debt issued by parties with credit ratings similar to ours.

Other operating (income) expense, net included unrealized losses primarily from semiconductor equipment held for sale of $82 million in 2019.

Other operating (income) expense, net included unrealized losses primarily from semiconductor equipment held for sale of $ 71 million and $ 82 million in 2020 and 2019, respectively.

The fair values were based on quotations obtained from equipment dealers, which consider the remaining useful life and configuration of the equipment (Level 3).

As of August 29, 2019 , assets held for sale were not material.

Assets held for sale were not significant as of the end of either period reported.

69 | 2020 10-K

Derivative Instruments

Gross Notional Amount

Fair Value of

Current Assets (1)

Current Liabilities (2)

As of August 29, 2019

Gross Notional Amount Fair Value of

Liabilities (2)

As of September 3, 2020

Derivative instruments with hedge accounting designation

Cash flow currency hedges

$ 1,845 $ 41 $ ( 2 )

Derivative instruments without hedge accounting designation

Non-designated currency hedges

Convertible notes settlement obligation (3)

1,587 4 ( 1 )

As of August 29, 2019

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Cash flow currency hedges

$ 146 $ 1 $ —

Derivative instruments without hedge accounting designation

Non-designated currency hedges

1,871 1 ( 9 )

Convertible notes settlement obligation (3)

Included in receivables – other.

$ 2 $ ( 188 )

(1) Included in receivables – other and other noncurrent assets.

(2) Included in accounts payable and accrued expenses – other for forward contracts and in current debt for convertible notes settlement obligations.

Notional amounts of convertible notes settlement obligations as of August 29, 2019 and August 30, 2018 were 4 million and 3 million shares of our common stock, respectively.

(3) As of August 29, 2019, the notional amount of settlement obligation for notes that had been converted was 4 million shares of our common stock.

Derivative Instruments with Hedge Accounting Designation

We utilize currency forward contracts that generally mature within 12 months to hedge our exposure to changes in currency exchange rates.

We utilize currency forward contracts that generally mature within two years to hedge our exposure to changes in currency exchange rates.

Currency forward contracts are measured at fair value based on market-based observable inputs including currency exchange spot and forward rates, interest rates, and credit-risk spreads (Level 2).

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Cash Flow Hedges :

We utilize cash flow hedges for our exposure from changes in currency exchange rates for certain capital expenditures.

We recognized losses of $3 million and $17 million and gains of $15 million for 2019 , 2018 , and 2017 , respectively, in accumulated other comprehensive income from the effective portion of cash flow hedges.

Neither the amount excluded from hedge effectiveness nor the reclassifications from accumulated other comprehensive income to earnings were material in 2019 , 2018 , or 2017 .

The amounts from cash flow hedges included in accumulated other comprehensive income that are expected to be reclassified into earnings in the next 12 months were also not material.

Fair Value Hedges :

In 2018, we utilized fair value hedges for our exposure from changes in currency exchange rates for certain monetary assets and liabilities.

The effects of fair value hedges on our consolidated statements of operations were as follows:

Non-Operating

Income (Expense)

For the year ended

Loss on remeasurement of hedged assets and liabilities

Gain on derivatives designated as hedged instruments

Amortization of amounts excluded from hedge effectiveness

We utilize cash flow hedges for our exposure from changes in currency exchange rates for certain capital expenditures and manufacturing costs.

We recognized gains of $ 51 million and losses of $ 3 million and $ 17 million for 2020, 2019, and 2018, respectively, in accumulated other comprehensive income from cash flow hedges.

The reclassifications from accumulated other comprehensive income to earnings were not significant in 2020, 2019, or 2018.

As of September 3, 2020, we expect to reclassify $ 24 million of pre-tax gains related to cash flow hedges from accumulated other comprehensive income into earnings in the next 12 months.

Derivative Instruments without Hedge Accounting Designation

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Currency forward contracts are valued at fair values based on the middle of bid and ask prices of dealers or exchange quotations (Level 2).

Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changes in the underlying monetary assets and liabilities from changes in currency exchange rates are included in other non-operating income (expense).

For derivative instruments without hedge accounting designation, we recognized losses of $32 million , $38 million , and $45 million for 2019 , 2018 , and 2017 , respectively.

For derivative instruments

without hedge accounting designation, we recognized gains of $ 21 million, and losses of $ 32 million and $ 38 million for 2020, 2019, and 2018, respectively.

Convertible Notes Settlement Obligations :

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The subsequent measurement amounts were based on the volume-weighted-average trading price of our common stock (Level 2).

(See "Debt" note.) We recognized losses of $58 million and $124 million for 2019 and 2018 , respectively, in other non-operating income (expense), net for the changes in fair value of the derivative settlement obligations.

Recognized gains and losses for 2017 were not material.

(See “Debt.”) We recognized losses of $ 14 million, $ 58 million, and $ 124 million for 2020, 2019 and 2018, respectively, in other non-operating income (expense), net for the changes in fair value of the derivative settlement obligations.

Derivative Counterparty Credit Risk and Master Netting Arrangements

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We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading risk across multiple financial institutions.

As of August 29, 2019 and August 30, 2018 , amounts netted under our master netting arrangements were not material.

As of August 29, 2019 , 108 million shares of our common stock were available for future awards under our equity plans, including 29 million shares approved for issuance under our employee stock purchase plan ("ESPP").

As of September 3, 2020 and August 29, 2019, amounts netted under our master netting arrangements were not material.

As of September 3, 2020, 90 million shares of our common stock were available for future awards under our equity plans, including 26 million shares approved for issuance under our employee stock purchase plan (“ESPP”).

Restricted Stock and Restricted Stock Units (“Restricted Stock Awards”)

As of August 29, 2019 , there were 16 million shares of Restricted Stock Awards outstanding, 14 million of which contained only service conditions.

As of September 3, 2020, there were 17 million shares of Restricted Stock Awards outstanding, 15 million of which contained only service conditions.

For service-based Restricted Stock Awards, restrictions generally lapse in one-fourth or one-third increments during each year of employment after the grant date.

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Restricted Stock Awards activity for 2020 is summarized as follows:

Number of Shares

Weighted-Average Grant Date Fair Value Per Share

Number of Shares Weighted-Average Grant Date Fair Value Per Share

Outstanding as of August 29, 2019 16 $ 34.72

Granted 8 46.44

Restrictions lapsed ( 6 ) 29.34

Outstanding as of August 29, 2019

Canceled ( 1 ) 40.59

Outstanding as of September 3, 2020 17 42.13

For the year ended 2020 2019 2018

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Aggregate vesting-date fair value of shares vested $ 294 $ 248 $ 259

71 | 2020 10-K

Employee Stock Purchase Plan

Our ESPP was offered to substantially all employees beginning in August 2018 and permits eligible employees to purchase shares of our common stock through payroll deductions of up to 10 % of their eligible compensation, subject to certain limitations.

The purchase price of the shares under the ESPP equals 85 % of the lower of the fair market value of our common stock on either the first or last day of each six -month offering period.

Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period.

Grant-date fair value and assumptions used in the Black-Scholes option valuation model were as follows:

For the year ended 2020 2019 2018

Weighted-average grant-date fair value per share $ 14.24 $ 11.60 $ 14.55

Average expected life in years 0.5 0.5 0.5

Weighted-average expected volatility 45.0 % 45.0 % 43.0 %

Weighted-average risk-free interest rate 0.8 % 2.2 % 2.2 %

Expected dividend yield 0.0 % 0.0 % 0.0 %

Under the ESPP, employees purchased 3 million shares of common stock for $ 118 million in 2020 and 3 million shares for $ 95 million in 2019.

Stock Options

Our stock options are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant.

Stock options issued after February 2014 expire eight years from the date of grant.

Options issued prior to February 2014 expire six years from the date of grant.

Option activity for 2019 is summarized as follows:

Number of Shares

Weighted-Average Exercise Price Per Share

Weighted-Average Remaining Contractual Life

Aggregate Intrinsic Value

Outstanding as of August 30, 2018

Canceled or expired

Outstanding as of August 29, 2019

Exercisable as of August 29, 2019

Unvested as of August 29, 2019

The total intrinsic value was $108 million , $446 million , and $198 million for options exercised in 2019 , 2018 , and 2017 , respectively.

As of September 3, 2020, there were 7 million stock options outstanding, which are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant.

Stock options expire 8 years from the date of grant.

In 2020, we did not grant any stock options and 5 million stock options were exercised.

The total intrinsic value for options exercised was $ 130 million, $ 108 million, and $ 446 million in 2020, 2019, and 2018, respectively.

Stock options granted and assumptions used in the Black-Scholes option valuation model were as follows:

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Treasury yield in effect at each grant date.

Employee Stock Purchase Plan

Our employee stock purchase plan ("ESPP") was offered to substantially all employees beginning in August 2018 and permits eligible employees to purchase shares of our common stock through payroll deductions of up to 10% of their eligible compensation, subject to certain limitations.

The purchase price of the shares under the ESPP equals 85% of the lower of the fair market value of our common stock on either the first or last day of each six -month offering period.

Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees' purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period.

Assumptions used in the Black-Scholes option valuation model were as follows:

For the year ended

Weighted-average grant-date fair value per share

Average expected life in years

Weighted-average expected volatility

Weighted-average risk-free interest rate

Expected dividend yield

Employees purchased 3 million shares of common stock for $95 million in 2019 under the ESPP.

Stock-based Compensation Expense

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Research and development 86 68 54

$ 328 $ 243 $ 198

Stock-based compensation expense by type of award

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Stock options 17 33 55

The income tax benefit related to share-based compensation was $66 million , $158 million and $97 million for 2019 , 2018 and 2017 , respectively.

The income tax benefits related to share-based compensation for the periods presented prior to the second quarter of 2018 were offset by an increase in the U.S.

valuation allowance.

Stock-based compensation expense of $30 million and $19 million was capitalized and remained in inventory as of August 29, 2019 and August 30, 2018 , respectively.

As of August 29, 2019 , $439 million of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2023 , resulting in a weighted-average period of 1.3 years.

$ 328 $ 243 $ 198

Income tax benefits related to the tax deductions for share-based awards are recognized only upon the settlement of the related share-based awards.

Income tax benefits for share-based awards were $ 72 million, $ 66 million and $ 158 million for 2020, 2019 and 2018, respectively.

Stock-based compensation expense of $ 42 million and $ 30 million was capitalized and remained in inventory as of September 3, 2020 and August 29, 2019, respectively.

As of September 3, 2020, $ 512 million of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2024, resulting in a weighted-average period of 1.2 years.

Employee Benefit Plans

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Retirement Plans

We have pension plans in various countries available to local employees which are generally government mandated.

As of August 29, 2019 , the projected benefit obligations of our plans were $206 million and plan assets were $195 million .

We have pension plans available to employees at various foreign sites.

As of September 3, 2020, the projected benefit obligations of our plans were $ 202 million and plan assets were $ 222 million.

As of August 29, 2019, the projected benefit obligations of our plans were $ 206 million and plan assets were $ 195 million.

Pension expense was not material for 2020, 2019, or 2018.

Revenue and Contract Liabilities

Revenue by product type was as follows:

73 | 2020 10-K

Revenue and Customer Contract Liabilities

Revenue by technology is presented in the table below (See “Segment and Other Information” for disclosure of disaggregated revenue by market segments.):

For the year ended 2020 2019 2018

DRAM $ 14,510 $ 16,841 $ 22,625

NAND 6,131 5,355 6,510

Other (primarily 3D XPoint memory and NOR) 794 1,210 1,256

MCP revenue is reported within NAND.

$ 21,435 $ 23,406 $ 30,391

Beginning in 2020, revenues for MCPs and SSDs, which contain both DRAM and NAND, are disaggregated into DRAM and NAND based on the relative values of each component.

The amounts for 2019 and 2018 in the table above have been conformed to current period presentation.

As of 2020 2019

Contract liabilities from customer advances $ 40 $ 61

Other contract liabilities 25 69

Our contract liabilities from customer advances are for advance payments received from customers to secure product in future periods.

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These balances are reported within other current liabilities and other noncurrent liabilities.

Revenue and interest expense associated with contract liabilities for the time value of advance payments was not material in any period presented.

As of August 29, 2019 , our future performance obligations beyond one year were not material.

Contract liabilities were as follows:

Opening Balance as of August 31, 2018

Contract liabilities from customer advances

Other contract liabilities

Revenue recognized during 2019 from the opening balance was $273 million , primarily from shipments against customer advances, which was partially offset by new customer advances.

As of August 29, 2019 , other current liabilities included $326 million for estimates of consideration payable to customers, including estimates for pricing adjustments and returns.

Revenue recognized during 2020 from the ending balance of 2019 included $ 81 million from meeting performance obligations of other contract liabilities and shipments against customer advances.

Contract liabilities from customer advances also decreased $ 22 million due to the return of an unutilized customer advance upon expiration of a contract.

Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods.

Substantially all contracts with our customers are short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery.

From time to time, we have contracts with initial terms that include performance obligations that extend, in some cases, beyond one year.

As of September 3, 2020, we expect future revenue related to these longer-term contracts of approximately $ 498 million, of which approximately 72 % relates to performance obligations and product shipments we expect to satisfy within the next 12 months and 28 % beyond 12 months.

As of September 3, 2020, other current liabilities included $ 466 million for estimates of consideration payable to customers, including estimates for pricing adjustments and returns.

Research and Development

We share the cost of certain product and process development activities with development partners.

Our R&D expenses were reduced by $60 million , $201 million , and $213 million for 2019 , 2018 , and 2017 , respectively, pursuant to reimbursements under these arrangements.

We have had agreements to jointly develop NAND and 3D XPoint technologies with Intel.

In 2018, we and Intel agreed to independently develop subsequent generations of 3D NAND and we substantially completed this cost-sharing arrangement in the third quarter of 2019.

We shared the cost of certain product and process development activities with development partners, including agreements to jointly develop NAND and 3D XPoint technologies with Intel.

We substantially completed our cost-sharing agreements with Intel to develop 3D NAND and 3D XPoint technology in 2019 and 2020, respectively.

Our R&D expenses were reduced by $ 60 million and $ 201 million for 2019 and 2018, respectively, pursuant to reimbursements under these arrangements.

Reimbursements were not significant for 2020.

Other Operating (Income) Expense, Net

For the year ended 2020 2019 2018

(Gain) loss on disposition of property, plant, and equipment

Restructure and asset impairments $ 60 $ ( 29 ) $ 28

Restructure and asset impairments primarily relate to our continued emphasis to centralize certain key functions.

(Gain) loss on disposition of property, plant, and equipment

( 3 ) 43 ( 96 )

Other 11 35 11

$ 68 $ 49 $ ( 57 )

Restructure and asset impairments for 2020 primarily related to asset impairments and employee relocation and severance costs related to right-sizing our Lehi, Utah facility.

Restructure and asset impairments for 2019 and 2018 primarily related to our continued emphasis to centralize certain key functions.

In addition, in 2019, we finalized the sale of our 200mm fabrication facility in Singapore and recognized restructure gains of $ 128 million.

In 2017, we recognized net restructure gains of $15 million related to the sale of our Lexar assets;

our assets associated with our 200mm fabrication facility in Singapore;

and our 40% ownership interest in Tera Probe, Inc and assembly and test facility located in Akita, Japan.

Other Non-Operating Income (Expense), Net

For the year ended 2020 2019 2018

Loss on debt prepayments, repurchases, and conversions

Loss from changes in currency exchange rates

Gain on remeasurement of previously-held equity interest in Inotera

On December 22, 2017, the United States enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"), which imposed a one-time transition tax in 2018 (the "Repatriation Tax") and, beginning in 2019, created a new minimum tax on certain foreign earnings (the "Foreign Minimum Tax").

In connection with the provisions of the Tax Act, we made an accounting policy election to treat the Foreign Minimum Tax provision as a period cost in the period the tax is incurred.

SEC Staff Accounting Bulletin No.

118 ("SAB 118") allowed the use of provisional amounts (reasonable estimates) if the analyses of the impacts of the Tax Act had not been completed when financial statements were issued.

During 2019, we finalized the computations of the income tax effects of the Tax Act.

As such, in accordance with SAB 118, our accounting for the effects of the Tax Act is complete.

Gain (loss) on debt prepayments, repurchases, and conversions $ 40 $ ( 396 ) $ ( 385 )

Gain (loss) from changes in currency exchange rates ( 8 ) ( 9 ) ( 75 )

Other 28 — ( 5 )

$ 60 $ ( 405 ) $ ( 465 )

Our income tax (provision) benefit consisted of the following:

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Income (loss) before income taxes, net income (loss) attributable to noncontrolling interests, and equity in net income (loss) of equity method investees

$ 308 $ ( 67 ) $ 141

Foreign 2,675 7,115 14,166

$ 2,983 $ 7,048 $ 14,307

Income tax (provision) benefit

federal $ ( 20 ) $ ( 36 ) $ ( 54 )

State ( 2 ) ( 2 ) 1

Foreign ( 148 ) ( 319 ) ( 374 )

( 170 ) ( 357 ) ( 427 )

federal 39 ( 146 ) 232

State 23 91 101

Foreign ( 172 ) ( 281 ) ( 74 )

( 110 ) $ ( 336 ) 259

Income tax (provision) benefit $ ( 280 ) $ ( 693 ) $ ( 168 )

75 | 2020 10-K

On December 22, 2017, the United States enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), which imposed a one-time transition tax in 2018 (the “Repatriation Tax”) and, beginning in 2019, created a new minimum tax on certain foreign earnings (the “Foreign Minimum Tax”).

We recognize the Foreign Minimum Tax in the period the tax is incurred.

Pursuant to SEC Staff Accounting Bulletin No.

118, measurement period adjustments in 2019 included $ 47 million of benefit for the Repatriation Tax, net of adjustments related to uncertain tax positions.

Provisional estimates in 2018 included $ 1.34 billion of benefit for the release of the valuation allowance on the net deferred tax assets of our U.S.

operations and $ 1.03 billion of provision for the Repatriation Tax, net of adjustments related to uncertain tax positions.

The table below reconciles our tax (provision) benefit based on the U.S.

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federal income tax (provision) benefit at statutory rate

Foreign tax rate differential

$ ( 626 ) 21.0 % $ ( 1,480 ) 21.0 % $ ( 3,677 ) 25.7 %

Change in unrecognized tax benefits ( 33 ) 1.1 % ( 59 ) 0.8 % 60 ( 0.4 ) %

Change in valuation allowance ( 20 ) 0.7 % ( 40 ) 0.6 % 2,079 ( 14.5 ) %

tax on foreign operations ( 14 ) 0.5 % ( 327 ) 4.6 % ( 20 ) 0.1 %

Foreign tax rate differential 253 ( 8.5 ) % 993 ( 14.1 ) % 2,606 ( 18.2 ) %

Foreign derived intangible income deduction 67 ( 2.2 ) % — — % — — %

Research and development tax credits 62 ( 2.1 ) % 92 ( 1.3 ) % 67 ( 0.5 ) %

State taxes, net of federal benefit 23 ( 0.8 ) % 102 ( 1.4 ) % ( 84 ) 0.6 %

Repatriation Tax related to the Tax Act — — % ( 10 ) 0.1 % ( 1,049 ) 7.3 %

Remeasurement of deferred tax assets and liabilities related to the Tax Act — — % — — % ( 179 ) 1.3 %

Change in valuation allowance

State taxes, net of federal benefit

Research and development tax credits

Other 8 ( 0.3 ) % 36 ( 0.5 ) % 29 ( 0.2 ) %

Income tax (provision) benefit $ ( 280 ) 9.4 % $ ( 693 ) 9.8 % $ ( 168 ) 1.2 %

Measurement period adjustments in 2019 included $47 million of benefit for the Repatriation Tax, net of adjustments related to uncertain tax positions.

Provisional estimates for 2018 in the table above included $1.34 billion of benefit for the release of the valuation allowance on the net deferred tax assets of our U.S.

operations and $1.03 billion of provision for the Repatriation Tax, net of adjustments related to uncertain tax positions.

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements, which expire in whole or in part at various dates through 2034, that are conditional, in part, upon meeting certain business operations and employment thresholds.

The effect of tax incentive arrangements reduced our tax provision by $756 million (benefiting our diluted earnings per share by $0.66 ) for 2019 , by $1.96 billion ( $1.59 per diluted share) for 2018 , and by $742 million ( $0.64 per diluted share) for 2017 .

A provision has been recognized for deferred taxes on undistributed earnings of non-U.S.

subsidiaries to the extent that dividend payments from such companies are expected to be subject to additional foreign withholding or state income tax.

As of August 29, 2019 , we had a deferred tax liability of $10 million associated with our undistributed earnings.

Certain non-U.S.

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements.

These arrangements expire in whole or in part at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds.

The effect of tax incentive arrangements reduced our tax provision by $ 215 million (benefiting our diluted earnings per share by $ 0.19 ) for 2020, by $ 756 million ($ 0.66 per diluted share) for 2019, and by $ 1.96 billion ($ 1.59 per diluted share) for 2018.

As of September 3, 2020, certain non-U.S.

subsidiaries had cumulative undistributed earnings of $ 2.70 billion that were deemed to be indefinitely reinvested.

A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax.

Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.

1 unchanged sentence

Deferred tax assets and liabilities consist of the following:

As of 2020 2019

Deferred tax assets

1 unchanged sentence

Accrued salaries, wages, and benefits 176 122

Operating lease liabilities 114 —

Property, plant, and equipment — 80

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Deferred tax liabilities

Right-of-use assets ( 95 ) —

Product and process technology ( 57 ) ( 138 )

Property, plant, and equipment ( 50 ) —

Other ( 99 ) ( 109 )

Deferred tax liabilities ( 301 ) ( 247 )

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We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized.

As of August 29, 2019 , and August 30, 2018 , we had a valuation allowance of $277 million and $228 million , respectively, against our net deferred tax assets, primarily related to net operating loss carryforwards in Japan.

As of September 3, 2020, and August 29, 2019, we had a valuation allowance of $ 294 million and $ 277 million, respectively, against our net deferred tax assets, primarily related to net operating loss carryforwards in Japan.

Changes in 2020 in the valuation allowance were due to adjustments based on management’s assessment of tax credits and net operating losses that are more likely than not to be realized.

As of August 29, 2019 , our federal, state, and foreign net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Expiration

Other Foreign

As of August 29, 2019 , our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Tax Credit Expiration

As of September 3, 2020, our net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Expiration State Japan Singapore Other Total

2021 - 2025 $ 49 $ 1,224 $ — $ 20 $ 1,293

2026 - 2030 313 84 — 10 407

2031 - 2035 337 — — 1 338

2036 - 2040 30 — — — 30

Indefinite 1 — 621 119 741

$ 730 $ 1,308 $ 621 $ 150 $ 2,809

77 | 2020 10-K

As of September 3, 2020, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:

Year of Tax Credit Expiration U.S.

Federal State Total

2021 - 2025 $ — $ 43 $ 43

2026 - 2030 — 71 71

2031 - 2035 — 131 131

2036 - 2040 321 4 325

Indefinite — 81 81

$ 321 $ 330 $ 651

Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:

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Settlements with tax authorities — — ( 8 )

Increases due to the Inotera Acquisition

Ending unrecognized tax benefits $ 411 $ 383 $ 261

As of August 29, 2019 , gross unrecognized tax benefits were $383 million , substantially all of which would affect our effective tax rate in the future, if recognized.

The amount accrued for interest and penalties related to uncertain tax positions was not material for any period presented.

As of September 3, 2020, gross unrecognized tax benefits were $ 411 million, substantially all of which would affect our effective tax rate in the future, if recognized.

Amounts accrued for interest and penalties related to uncertain tax positions were not material for any period presented.

The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits.

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states, and various foreign jurisdictions throughout the world.

We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented.

federal and state tax returns remain open to examination for 2016 through 2020.

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Net income attributable to Micron – Basic

$ 2,687 $ 6,313 $ 14,135

Assumed conversion of debt ( 4 ) ( 12 ) —

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Earnings per share

Basic $ 2.42 $ 5.67 $ 12.27

Diluted 2.37 5.51 11.51

Listed below are the potential common shares, as of the end of the periods shown, that could dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been antidilutive:

For the year ended 2020 2019 2018

Convertible notes

Segment Information

Equity plans 5 8 3

Segment and Other Information

Segment information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker.

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Compute and Networking Business Unit (“CNBU”) :

Includes memory products sold into client, cloud server, enterprise, graphics, and networking markets.

Includes memory products sold into client, cloud server, enterprise, graphics, and networking markets and sales of certain 3D XPoint products.

Mobile Business Unit (“MBU”) :

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Storage Business Unit (“SBU”) :

Includes SSDs and component-level solutions sold into enterprise and cloud, client, and consumer storage markets as well as other discrete storage products sold in component and wafer forms to the removable storage markets and sales of 3D XPoint memory.

Includes SSDs and component-level solutions sold into enterprise and cloud, client, and consumer storage markets, other discrete storage products sold in component and wafer form to the removable storage market, and sales of certain 3D XPoint products.

Embedded Business Unit (“EBU”) :

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We do not identify or report internally our assets (other than goodwill) or capital expenditures by segment, nor do we allocate gains and losses from equity method investments, interest, other non-operating income or expense items, or taxes to segments.

As of August 29, 2019 and August 30, 2018 , CNBU, MBU, SBU, and EBU had goodwill of $832 million , $198 million , $101 million , and $97 million , respectively.

As of September 3, 2020 and August 29, 2019, CNBU, MBU, SBU, and EBU had goodwill of $ 832 million, $ 198 million, $ 101 million, and $ 97 million, respectively.

79 | 2020 10-K

For the year ended 2020 2019 2018

CNBU $ 9,184 $ 9,968 $ 15,252

MBU 5,702 6,403 6,579

SBU 3,765 3,826 5,022

EBU 2,759 3,137 3,479

All Other 25 72 59

$ 21,435 $ 23,406 $ 30,391

Operating income (loss)

CNBU $ 2,010 $ 4,645 $ 9,773

MBU 1,074 2,606 3,033

SBU 36 ( 386 ) 964

EBU 301 923 1,473

All Other ( 2 ) 13 —

3,419 7,801 15,243

Stock-based compensation ( 328 ) ( 243 ) ( 198 )

Restructure and asset impairments ( 60 ) 32 ( 28 )

Employee severance — ( 116 ) —

Start-up and preproduction costs — ( 58 ) —

Restructure and asset impairments

Flow-through of Inotera inventory step up

Other ( 28 ) ( 40 ) ( 23 )

( 416 ) ( 425 ) ( 249 )

Operating income $ 3,003 $ 7,376 $ 14,994

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For the year ended 2020 2019 2018

CNBU $ 2,318 $ 1,833 $ 1,755

MBU 1,436 1,235 1,077

SBU 1,115 1,555 1,295

EBU 741 748 603

All Other 12 27 18

Unallocated 28 26 11

$ 5,650 $ 5,424 $ 4,759

Certain Concentrations

Markets with concentrations of revenue were approximately as follows:

Revenue by market segment as an approximate percent of total revenue is presented in the table below:

For the year ended 2020 2019 2018

Mobile 25 % 25 % 20 %

Client and graphics 20 % 20 % 25 %

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Automotive, industrial, and consumer 15 % 15 % 10 %

Revenue from Kingston Technology Company, Inc.

was 11 %, 11 %, and 10 % of total revenue for 2020, 2019, and 2018, respectively.

Revenue from Huawei Technologies Co.

was 12 % of total revenue for 2019.

Revenue from Kingston Technology Company, Inc.

was 11% of total revenue for 2019 and 10% of total revenue for 2018 and 2017 .

No other customer exceeded 10% of our total revenue.

Our sales to Huawei were included in our MBU, CNBU, SBU, and EBU segments and our sales to Kingston were included in our CNBU, MBU, and SBU segments.

Our sales to Kingston were included in our CNBU, MBU, and SBU segments and our sales to Huawei were included in our MBU, CNBU, SBU, and EBU segments.

We generally have multiple sources of supply for our raw materials and production equipment;

however, only a limited number of suppliers are capable of delivering certain raw materials and production equipment that meet our standards and, in some cases, materials or production equipment are provided by a single supplier.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash, money market accounts, certificates of deposit, fixed-rate debt securities, trade receivables, share repurchase, capped call, and derivative contracts.

We invest through high-credit-quality financial institutions and, by policy, generally limit the concentration of credit exposure by restricting investments with any single obligor and monitoring credit risk of bank counterparties on an ongoing basis.

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We seek to mitigate such risk by limiting our counterparties to major financial institutions and through entering into master netting arrangements.

Capped call agreements expose us to credit risk to the extent the counterparties may be unable to meet the terms of the agreements.

We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading the risk across several major financial institutions.

In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis.

Geographic Information

Revenue based on the geographic location of our customer's headquarters was as follows:

Revenue based on the geographic location of our customers’ headquarters was as follows:

For the year ended 2020 2019 2018

United States $ 10,381 $ 12,451 $ 17,116

Taiwan 3,657 2,703 3,918

Mainland China (excluding Hong Kong) 2,337 3,595 3,607

Hong Kong 1,792 1,614 1,761

Japan 1,387 958 1,265

Other Asia Pacific 1,157 1,032 1,458

We ship our products to locations specified by our customers and, as a result, customers may have headquarters in one location with global supply chain and operations in other locations.

Our customers may request we deliver products to countries where they own or operate production facilities or to countries where they utilize third-party subcontractors or warehouses.

Based on the ship-to locations specified by our customers , revenue from sales into China (including Hong Kong) accounted for 53% , 57% , and 51% of total revenue in 2019, 2018, and 2017, respectively;

revenue from sales into Taiwan accounted for 13% , 9% , and 13% of total revenue in 2019, 2018, and 2017, respectively;

and revenue from sales into the United States accounted for 11% , 12% , and 14% of total revenue in 2019, 2018, and 2017, respectively.

Net property, plant, and equipment by geographic area was as follows:

Other 724 1,053 1,266

$ 21,435 $ 23,406 $ 30,391

81 | 2020 10-K

Long-lived assets by geographic area consisted of property, plant, and equipment and right-of-use assets and were as follows:

As of 2020 2019

Taiwan $ 10,516 $ 9,397

Singapore 8,161 7,986

Japan 6,478 5,202

United States 5,434 5,048

Quarterly Financial Information (Unaudited)

China 478 370

Other 548 237

$ 31,615 $ 28,240

Quarterly Financial Information

(in millions, except per share amounts)

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Quarter Third

Quarter Second

Quarter First

Revenue $ 6,056 $ 5,438 $ 4,797 $ 5,144

Gross margin 2,068 1,763 1,355 1,366

Operating income 1,157 888 440 518

Net income 990 805 407 508

Net income attributable to Micron 988 803 405 491

Earnings per share

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

$ 0.89 $ 0.72 $ 0.37 $ 0.44

0.87 0.71 0.36 0.43

Quarter Third

Quarter Second

Quarter First

Revenue $ 4,870 $ 4,788 $ 5,835 $ 7,913

Gross margin 1,395 1,828 2,864 4,615

Operating income 650 1,010 1,957 3,759

Net income 586 851 1,625 3,296

Net income attributable to Micron 561 840 1,619 3,293

Earnings per share

$ 0.51 $ 0.76 $ 1.45 $ 2.91

0.49 0.74 1.42 2.81

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Micron Technology, Inc.:

To the Board of Directors and Shareholders of Micron Technology, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Micron Technology, Inc.

and its subsidiaries (the "Company") as of August 29, 2019 and August 30, 2018, and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the three years in the period ended August 29, 2019, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended August 29, 2019 as listed in the index appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of August 29, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 29, 2019 and August 30, 2018 , and the results of its operations and its cash flows for each of the three years in the period ended August 29, 2019 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 29, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

and its subsidiaries (the “Company”) as of September 3, 2020 and August 29, 2019, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended September 3, 2020, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 3, 2020 appearing under Item 15 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of September 3, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 3, 2020 and August 29, 2019 , and the results of its operations and its cash flows for each of the three years in the period ended September 3, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 3, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in the Recently Adopted Accounting Standards note to the consolidated financial statements, the Company changed the manner in which it accounts for leases in the year ended September 3, 2020.

Basis for Opinions

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting

83 | 2020 10-K

includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revised Useful Lives of Equipment in the NAND Wafer Fabrication Facilities

As described in the Significant Accounting Policies and Property, Plant, and Equipment notes to the consolidated financial statements, the Company periodically assesses the estimated useful lives of its property, plant, and equipment.

The Company’s consolidated property, plant, and equipment, net balance as of September 3, 2020 was $31 billion.

Based on management’s assessment of planned technology node transitions, capital spending, and re-use rates, management revised the estimated useful lives of existing equipment in the NAND wafer fabrication facilities from five years to seven years as of the beginning of fiscal year 2020.

The principal considerations for our determination that performing procedures relating to the revised useful lives of equipment in the NAND wafer fabrication facilities is a critical audit matter are the significant judgment by management in developing the revised estimate of useful lives, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures to evaluate the reasonableness of the significant assumptions used to estimate the revised useful lives of the equipment related to planned technology node transitions, capital spending, and re-use rates.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s assessment of the revised useful lives, significant assumptions, and data used to estimate the revised useful lives of equipment in the NAND wafer fabrication facilities.

These procedures also included, among others, (i) testing management’s process for developing the seven year useful life, (ii) testing the completeness, accuracy, and relevance of underlying data used in the assessment, and (iii) evaluating the reasonableness of the significant assumptions used by management related to planned technology node transitions, capital spending, and re-use rates.

Evaluating management’s assumptions related to planned technology node transitions, capital spending, and re-use rates involved evaluating whether the assumptions used by management were reasonable considering (i) planned technology node transitions based on industry data as compared to historical technology node transitions, (ii) historical trends of capital spending, and (iii) historical length of service of previously purchased equipment and re-use rates of equipment based on technology node transitions.

Valuation of Inventories (Finished goods and Work in process)

As described in the Significant Accounting Policies and Inventories notes to the consolidated financial statements, determining the net realizable value of the Company's net inventories involves significant judgments, including projecting future average selling prices and future sales volumes.

As of August 29, 2019, the Company had a net inventory balance for finished goods and work in process inventory totaling approximately $4.6 billion.

The principal considerations for our determination that performing procedures relating to the valuation of finished goods and work in process inventories is a critical audit matter are the valuation involved the application of significant judgment on the part of management, which in turn led to significant judgment, subjectivity and effort in performing our audit procedures over the reasonableness of the significant assumptions used to estimate net realizable value of its finished goods and work in process inventories, including future average selling prices and future sales volumes.

As described in the Significant Accounting Policies and Inventories notes to the consolidated financial statements, as of September 3, 2020, the Company had a net inventory balance for finished goods and work in process inventory totaling approximately $4.9 billion.

As disclosed by management, determining the net realizable value of the Company’s net inventories involves significant judgments, including projecting future average selling prices and future sales volumes.

The principal considerations for our determination that performing procedures relating to the valuation of finished goods and work in process inventories is a critical audit matter are the significant judgment by management in determining the net realizable value of inventories, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures over the reasonableness of the significant assumptions related to future average selling prices and future sales volumes, used to estimate the net realizable value of finished goods and work in process inventories.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the Company's estimate of net realizable value of its finished goods and work in process inventories, significant assumptions, and data used to value its inventories.

These procedures also included, among others, testing management's process for developing the net realizable value estimate of its finished goods and work in process inventories;

evaluating the appropriateness of the Company's estimated net realizable value methodology;

testing the completeness, accuracy, and relevance of underlying data used in the estimate of net realizable value of its finished goods and work in process inventories;

and evaluating the reasonableness of management's assumptions, including future average selling prices and future sales volumes.

These procedures included testing the effectiveness of controls relating to management’s estimate of the net realizable value of finished goods and work in process inventories, significant assumptions, and data used to value the inventories.

These procedures also included, among others, testing management’s process for developing the net realizable value estimate of finished goods and work in process inventories;

evaluating the appropriateness of management’s estimated net realizable value methodology;

testing the completeness, accuracy, and relevance of underlying data used in the estimate of net realizable value of finished goods and work in process inventories;

and evaluating the reasonableness of management’s assumptions, related to future average selling prices and future sales volumes.

Evaluating management’s assumptions related to future average selling prices and future sales volumes involved evaluating whether the assumptions used by management were reasonable considering (i) current and past results, including recent sales, (ii) the consistency with external market, industry data and current contract prices, (iii) a comparison of the prior year estimates to actual results in the current year, and (iv) and whether these assumptions were consistent with evidence obtained in other areas of the audit.

3 unchanged sentences

We have served as the Company’s auditor since 1984.

85 | 2020 10-K

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data